CAPE TOWN – The number of residential building plans passed, a leading indicator of the direction of building completions in the future, declined sharply in the second quarter, FNB Property Sector Strategist John Loos said on Monday.
The number of units’ plans passed declined year-on-year by -24.8 percent, following a -13.7 percent decline in the first quarter. “These quarterly declines should begin to feed through into weaker completions growth in the very near term,” said Loos.
He said the year-on-year inflation rate in the value per square metre of plans passed and plans completed had both slowed, as the slower home market, with real average price deflations, had made it tough for the new development sector to compete with existing prices.
‘’This gives an idea to what extent of new building values have become less competitive since 2007, and largely explains why, even despite a little surge in completions of late, building completions remain well below the 2007 and prior years’ levels,’’ said Loos.
“Last week, the release of StatsSA building statistics for June completed the 2nd quarter picture for the Residential Building Sector, and a sharply weakening near-term picture has become likely,” said Loos.
The StatsSA Residential Building Statistics showed building completions growth being strong at a time when the country was well into its longest business cycle downward phase post-World War II period.