Building a new house is more expensive in 2015

The building cost of new housing constructed averaged R5 908 per square metre in the period January to April this year, resulting in an increase of 3.2% year-on-year (y/y) on the building cost of R5 724 per square metre in the corresponding period last year.

The building cost of new housing constructed averaged R5 908 per square metre in the period January to April this year, resulting in an increase of 3.2% year-on-year on the building cost of R5 724 per square metre in the corresponding period last year.

This is according to Jacques du Toit, Property Analyst for Absa Home Loans, who says this is reflected in the Absa Residential Building statistics.

He says building costs are driven by building material costs, labour costs, transport costs, equipment costs, land prices, rezoning costs, and developer and contractor holding costs and profit margins.

The demand and supply of new housing, as reflected in levels of residential building activity, are impacted by the growth in population and household numbers. 

However, Du Toit says trends and prospects for factors such as economic growth, employment, living costs, interest rates, the state of household finances and consumer and building confidence, also contribute to the performance of residential building activity.

Levels of building activity in the South African market for new housing showed divergent trends in the first four months of 2015, with volumes in the planning phase growing, while volumes in the construction phase declined from the corresponding period in 2014.

This divergent course in levels of residential building activity originated from opposite trends on a segment level in both the planning and construction phases, he says.

These trends are based on data published by Statistics South Africa in respect of building activity related to private sector financed housing.

The real value of plans approved for new residential buildings was up by 15.5% y/y, or R1.58 billion, to a total of R12.08 billion in the four-month period to April this year. 

The real value of residential buildings reported as completed was up by 3% y/y, or R207 million, to R7.13 billion in the first four months of the year when compared with the same period a year ago. These real values are calculated at constant 2010 prices.

The number of new housing units for which building plans were approved, increased by 4.6% y/y, or 813 units, to 18 441 units in the period January to April 2015. 

Du Toit says while the volume of plans approved for houses smaller than 80sqm was down by 19% y/y up to April, the number of flat and townhouse units planned increased by almost 40% y/y over the same period.

The volume of new housing units reported as constructed declined by 5.2% y/y, or 628 units, to 11 492 units in the first four months of the year, mainly as a result of the flat and townhouse segment contracting by around 34% y/y in January to April. 

The construction of houses larger than 80sqm saw growth of almost 18% y/y in the four-month period.

“Although there can be a significant lag between the planning and completion of relatively large housing projects, such as flat and townhouse developments, the strong growth in respect of the planning phase in this segment of housing in the first four months of 2015 is expected to be reflected in the construction phase later in the year,” he says.

Article Sourced on Property24