By Larry Claasen
THE value in building plans passed in the Western Cape dropped a massive 19,2% to R13,99-billion in the six month period to end June 2024, according to Statistics South Africa .
This drop off was part of a broader trend that saw a 13,4% fall to R46,91-billion for building plans passed by larger municipalities across the country for the period.
The biggest drivers of the construction sector, the Western Cape and Gauteng, which collectively account for 67,7% of building activity, both saw sizable falls in value of plans passed.
The fall came at a difficult time for the construction sector. The emergence of extortion rackets, persistently high interest rates, and concern over the outcome of national elections has weighed on the economy and the sector.
The fall off in the Western Cape, however, goes against the trend which has seen the region outpace the construction sector in other parts of the country.
The Rainmaker Marketing April 2024 Property Market Report said that the value in building plans passed in the Western Cape in 2023 exceeded that of the Eastern Cape, Northern Cape, Free State, North West, Mpumalanga and Limpopo combined.
The Western Cape even eclipse Gauteng in the value of building completed in 2023, with the cape completing R25-billion compared to the country’s economic heartland’s R20-billion.
“Statistics South Africa shares insights into the building activities in the Western Cape, revealing that the building plans passed far exceed the country’s average, and that the buildings completed are the highest in South Africa. For every five buildings completed in South Africa between 2022 and 2023, two of these are within the Western Cape,” the report said.
The Rainmaker Marketing report noted that the province had benefited from semigration and has seen consistent increase over the years from 31% in 2020 to completed in South Africa 46% by 2023.
Though the report was positive about the outlook for the sector, there were signs a slowdown was on the way, as building plans passed had dropped from R35-billion in 2022 to R30-billion in 2023.
The Year-on-Year (YOY) drop off in plans passed and completions spells trouble ahead for the supply-side of the residential property market, warned BetterBond in its August 2024, Property Brief.
“Once interest rates start to decline, which could happen quite soon, a shortage of properties is bound to develop, which is highly likely to translate into significant price increases from the fourth quarter of 2024 onwards.”
Higher property prices will be just another difficulty South Africans will have to deal with. BetterBond pointed out that high interest rates were taking its toll on consumers.
“During July, the Reserve Bank’s Monetary Policy Committee (MPC) dashed the hopes of millions of indebted South African households and businesses by maintaining the highest lending rate in 14 years. In the process of the refusal to depart from an overly restrictive monetary policy stance, the ratio of debt costs to disposable income has now reached a level of 9,2% – the highest in 15 years.”
It added: “It is no surprise, therefore, that an array of key indicators of economic activity (in real terms) remain in a declining mode. These include the Afrimat Construction Index, retail trade sales, the Altron Fintech Household Resilience Index and the YOY value of new building plans passed.”
