Residential building sector underperforms during Q3 2024, commercial building sector shows improvement

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09-09-2024
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Property Wheel
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While overall building activity remained relatively stable during Q3 2024, contractors in the commercial building sector fared better than their residential building counterparts.

According to Stats SA, the real value of residential building investment contracted by 7.3% year-on-year during Q2 2024 compared to a milder contraction of 3.7% year-on-year for commercial building investment.

“The weakness in residential building activity reflects the downbeat trends in the housing property sector,” comments Siphamandla Mkhwanazi, senior economist at FNB. “Moreover, the cessation of load shedding since March has reduced demand for residential energy installations, an important source of work for the sector in the recent past. Meanwhile, demand for commercial buildings is faring better, but off a low base.”

However, work at the start of the building pipeline was much more upbeat with a marked rise in architect (and to a lesser extent, quantity surveyor) activity which suggests that building demand is increasing.

“Given the level of activity, one would have expected confidence to rise by even more. However, respondents are increasingly concerned about the delays at municipalities regarding plan approvals which is hindering their progress on projects,” notes Mkhwanazi.

“While the outlook for activity is encouraging, several constraints continue to weigh on sentiment in the sector such as delays in municipal approvals and crime and extortion (i.e. the construction mafia). These will need to be addressed to ensure that projects can progress and be completed on time and within budget.”