The State of the South African Construction Industry

Industry Insight (a company established to provide market intelligence on South Africa’s construction industry) launched their second quarter report for 2012 titled: The State of the South African Construction Industry.   Industry Insight provides data on the construction industry’s four sectors: Residential, Social Housing, Non-Residential and Civil Works. The construction industry plays a very important role within all built environment sectors. The residential sector (inclusive of social housing) is largely affected by fluctuations within the industry. It is therefore important that we are aware of the changes that occur in the construction sector.

Some of the interesting points that emerge from the report are:

• The fourth quarter of 2011 saw the expansion of 0.9% with regard to investment in the overall construction sector, which was an improvement from the  third quarter of 2011
• Construction investment for residential buildings has decreased by 2,2% – the lowest contraction in 17 quarters.  Although that is the case, demand for housing within the affordable sector will impact positively on investment in the coming years.
•  Construction for dwellings smaller than 80m² reported a decline of 3.9% in March 2012, and for those greater than 80m² slowed by 0.9%.
• Activity in social housing (government subsidised housing) has shown signs of improvement and increased by 15% in March 2012. The number of low cost housing projects awarded also increased, however
  • The number of low-income housing projects tendered in March 2012 declined and recorded a contraction rate of 11.3% from March 2011 to March 2012
  • Postponements of low-income housing contracts grew by 41,3% y/y in March 2012,
  • According to the ABSA 2012 second quarter Housing Review, houses between 80m²-140m²  measured at -4,2% y/y nominal and -8,7% y/y real, these house price values fell by 17,8% y/y in April 2012 falling to R622 129 from R756 520 in (April 2011)

Although construction within the affordable housing sector is declining, this is less rapid than previously and demand remains high. The report cites constraints such as access to mortgage finance and rapidly rising housing operating costs that limit affordability and prevent households from entering this sector. There remains a vast need for innovation within the finance sector so that products are designed that can cater to this segment of the population.

The rest of the paper reports on other sectors of the construction industry. To view the full paper, click this link.