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News & Press: 2017 News Items

Confidence at a low... but there is hope

09 December 2017  
Posted by: Bert vd Heever
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The following appears in the January/February 2018 issue of Walls and Roofs:

Reports* of construction sector confidence plummeting to a 17-year low should not be the reason for investors and developers to lose complete faith in the industry, according to the Building and Property Economics Committee of ASAQS.

“Low confidence in the construction sector is a cause for concern due to the impact on investment and risk,” says James Hanley, chairman of the committee. “The built environment is however known for being cyclical, and these cycles last approximately three years.”

While sensible business planning and building up reserves in their practices are the standard recommendation during times of high confidence and investment, built environment professionals tend to be at the mercy of the market.

What is needed to smooth out the cycles, are better governmental planning and longer-term infrastructure  commitments that enable the sector to respond and build capacity. “If the past is anything to go by, the industry will start to improve soon,” says Hanley. “The construction industry normally lags the general industry by about six months, so improving conditions in the general economy tend to influence the cycle accordingly.”

The committee also warns against aggressive fee discounting that adds additional pressure to professionals such as quantity surveyors. This practice not only threatens the livelihood of individuals, but undercuts the reputation of an entire sector as a severe reduction in fees can easily create a perception that is disproportionate to the real value of a service.

“Fee discounting is at best a poor business decision, and at worst anticompetitive,” warns Hanley. Professionals who portray low confidence in their own skills through a willingness to undercut standard industry fees are doing more damage to the sector than macroenvironmental factors.”

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* FNB Bureau of Economic Research Civil Confidence Index (indicating the percentage of civil engineering contractors who are satisfied with prevailing business conditions).