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The first half of 2014 saw the planning phase of residential building activity in the South African market for new housing, as reflected by the number of building plans approved by local government authorities, growing relatively strongly compared with the same period last year. The construction phase, i.e. housing reported as completed, showed a significant contraction in the period January to June this year from a year ago. These trends in private sector-financed residential building activity are from data published by Statistics South Africa.
The number of new housing units for which building plans were approved by local government institutions was up by almost 11% year-on-year (y/y) to 28 363 units in the first half of the year, increasing by 2 759 units from a total of 25 604 units a year ago. This growth mainly occurred in the segments of smaller-sized houses (<80m²) and higher-density flats and townhouses. The improvement in levels of activity in the planning phase in the first six months of the year should eventually be reflected in the construction phase.
The construction phase of new housing, i.e. the number of new units reported as completed, experienced a contraction of more than 17% y/y in the first half of 2014, with all categories of housing showing lower levels of completion compared with the corresponding period last year. New housing construction activity dropped by 3 646 units to 17 233 in the period January to June from 20 879 units a year ago.
The average building cost of new housing constructed averaged R5 696 per square metre in the first six months of 2014, which came to an increase of 15,4% y/y from R4 938 per square metre in the corresponding period last year. Building costs are affected by factors such as building material costs, labour costs, transport costs, equipment costs, land values, rezoning costs, and developer and contractor holding costs and profit margins.
The total amount of square metres for which plans were approved in respect of alterations and additions to existing houses dropped by 1% y/y in the first half of the year, whereas the building area completed in this regard was down by 38,1% y/y over the same period.
Against the background of trends in and prospects regarding the economy, household finances, and consumer and building confidence, residential building activity is expected to remain relatively subdued compared with previous years. The average number of building plans approved for new housing amounted to 50 251 units per annum in the period 2010-2013, i.e. after the recession of 2008/09, which came to only 50,1% of the annual average of 100 406 units in the period 2004-2007. The average number of housing units constructed amounted to 41 412 units per annum in 2010
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