The City of Johannesburg continues to see a drop in new property construction, and is the only main metro in the country to be experiencing this downward trend.
Tshwane and Ekurhuleni, the other two main metros in Gauteng, however, are seeing increased volumes of residential building.
All main cities in South Africa have seen a rebound in building activity since the Covid lockdown, particularly eThekwini and Nelson Mandela Bay.
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The City of Cape Town accounts for the largest percentage of building plans passed within the Western Cape, but its portion of the total for the province is declining.
After peaking at over 72 percent of all Western Cape plans passed (by value) between 2013 and 2016, Dr Andrew Golding, chief executive of the Pam Golding Property group, says the percentage began declining in 2017 and had fallen to just 44.3 percent of total Western Cape plans passed by last year.
“When reviewing the total number of plans passed, all major metro markets have experienced a rebound in activity from the pandemic-induced slowdown – with the exception of Johannesburg, where the number of plans continues to decline. Notably, Nelson Mandela Bay and eThekwini have seen the number of plans passed recover beyond pre-Covid levels.”
A similar picture emerges when looking at the value of plans passed.
“Nelson Mandela Bay and eThekwini have rebounded beyond 2019 levels while the other metros – except for Johannesburg, have recovered, but are yet to regain pre-Covid levels.”
Interestingly, he notes, while the Western Cape overall exceeds Gauteng in terms of the value of building plans passed in 2022, at a metro level, Tshwane registered a higher value of building plans passed than Cape Town in both 2021 and 2022. This suggests that a growing percentage of building plans passed in the Western Cape is occurring in areas outside the metro market – such as in the Boland, Overberg, and towns along the Garden Route. In Gauteng, the rebound in building plans passed in Tshwane is being at least partially offset by a decline in the value of plans elsewhere, such as in Johannesburg.
“In Gauteng, and not surprisingly, during Covid, all three metros registered a decline in the value of building plans passed. Positively, however, Tshwane rebounded strongly thereafter, with the value of plans passed in both 2020 and 2021 higher than in 2019 – although that presumably is attributable to significantly higher building costs.
“Ekurhuleni also experienced a rebound, with 2021 and 2022 values higher than any other year in the past decade.”
Other than in 2010 and 2011, Golding says Tshwane has consistently registered the highest value of building plans passed among Gauteng’s three major metros, which may suggest more expensive homes are being built there.
In Ekurhuleni, between 2015 and 2020, Benoni experienced the most activity in respect of building plans passed, although activity has slowed sharply post-Covid. Meanwhile, Kempton Park and Boksburg have both more than fully recovered post-pandemic and have registered more consistent levels of activity.
“When tracking the value of building plans passed in Ekurhuleni, despite being hard hit by Covid, Kempton Park is clearly the dominant metro in terms of the value of plans passed and has also experienced a robust post-Covid recovery. Boksburg has seen a slow but steady increase in the value of plans passed, while the surge in the number of plans passed in Benoni has not translated to a spike in the value of plans passed, which may be attributable to more affordable housing.”
Building confidence grows slightly
Meanwhile, after slipping to 28 in Q2 2023, sentiment in the building sector, as measured by the FNB/BER Building Confidence Index, gained six points to register a level of 34 in Q3 2023. Still, the current level of the index means that more than 65% of respondents are dissatisfied with prevailing business conditions.
Compared to Q2, the following changes in confidence were recorded:
- building material manufacturers (+13)
- quantity surveyors (+13)
- architects (+7)
- building sub-contractors (+7)
- main contractors (-2)
- hardware retailers (-2).
Similarly, says FNB senior economist Siphamandla Mkhwanazi, the core building confidence index (excluding building material manufacturers and hardware retailers) rose to 39 in Q3. Along with Q1 2023, this is the best level since Q2 2018.
The most notable development this quarter is the jump in sentiment of non-residential builders (this includes main and sub-contractors) to 52, from 42 in Q2. Underpinning the better business mood was continued activity growth and a marked improvement in profitability.
“The non-residential property market remains weak, characterised by, among other things, still high national office vacancy rates and constraints on the manufacturing and retail sectors, which drive demand for industrial and shopping space. Despite this, new building activity is robust and order books are looking more promising.”
He says several factors, including possible ongoing retrofitting of office space post Covid and to deal with the energy crisis, semigration of firms to the Western Cape, and low technical base effects are contributing to this resurgence in non-residential building activity.
Residential building activity also improved, although business confidence declined to its lowest level this year while the rating of the lack of new demand as a business constraint – a proxy for order books, remains elevated.
“With the exception of some regions, mainly in the Western Cape, the residential property sector is struggling due to weak demand amid restrictive monetary policy. As a result, while there is work currently, the appetite for new residential buildings is starting to diminish somewhat,” Mkhwanazi says.