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News & Press: 2017 News Items

Building plans passed for private sector may indicate an economic shift to the South

Saturday, 28 October 2017  
Posted by: Bert vd Heever
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Past president of the Association of South African Quantity Surveyors (ASAQS), Bert van den Heever says that the latest statistics released on the value of recorded building plans passed for the private sector may indicate an economic shift to the south of the country.

The value of recorded building plans passed for the private sector (at current prices) decreased by 2,4% (-R1 759,1 million) during January to August 2017 compared with January to August 2016.

Non-residential buildings fell by 14,3% (-R2 769,5 million) and additions and alterations rose by 7,4% (R1 294,4 million).

Although Gauteng remains the biggest contributor with 37,5% of the total value of building plans passed compared to the Western Cape's 25,1%, Gauteng also showed the largest negative swing when compared to last year's figures, with the value of plans passed decreasing by a whopping -R3 438,5 million!

Building plans passed graphic (not to scale)

The graphic above (which is not to scale), illustrates how the Western- and Eastern Cape helped to set off this dismal performance in Gauteng by showing major increases in the value of projects at planning stage. The value of plans passed in the Western Cape rose by +R1 746 077 million from +R18 061 495 million to +R19 807 572 million a growth of 9,7% compared to a year ago.

Chris Steffen, ASAQS board member and director of Talani Quantity Surveyors in Cape Town says that although the migration to the Western Cape and shortage of housing has been driving growth, there are other factors such as the DAMS IT platform that could have played a role in the value of plans passed.

The DAMS (Development Application and Management System) IT platform, where plans submission and processing is online, has created greater efficiency as has the recent change in a bylaw where officials are held accountable and kept to timelines for plans approvals.

Chris says that spatial development frameworks have been introduced to encourage and fast track development.

Deon van Zyl, chairman of the Western Cape Property Development Forum, cautions; "The reality is that our economic growth in the Western Cape is perhaps being driven more by semigration than by real new economic growth. At a medium and long term perspective I am concerned about the slow pace of new EIA applications at a Provincial level.  EIA applications tend to identify the larger developments (> 5ha triggering the National Environmental Management Act) that are in the pipeline.  We are not seeing a growth in new applications"

Van Zyl continues; "What is desperately needed is investment that will lead to job creation.  Property development remains a bell weather industry reflecting the economy at a point in time.  Investment is a direct response to confidence.  The Provincial and local governments’ attempts to practice and reflect clean governance do assist in generating confidence in the Western Cape.  What we desperately need is confidence in the country."

The Eastern Cape's figures are surprisingly high and built environment professionals in that province should be smiling as the value of plans passed increased by a staggering 53,5% compared to those recorded a year ago. The value increased by +R1 509 465 million from +R2 821 451- to +R4 330 916 million.

Will this increased growth in the Eastern Cape be sustainable in the long run? Only time will tell.

Other provinces showed decreases in real terms. In fact, the real value of recorded building plans passed in South Africa (at constant 2015 prices) decreased by 7,9% (-R5 402,4 million) year-on-year during January to August 2017. The largest percentage decrease was recorded for non-residential buildings (-19,5% or -R3 607,6 million), followed by residential buildings (-6,2% or -R2 061,9 million)

The table below sums up what has happened over the past 8 months:

Building plans passed for the private sector August 2017

It's normal that people try to mitigate their risk during trying- and uncertain economic times by rather spending money on fixing up existing property than splashing out on a new-builds. The latest figures support that view by reflecting a +7,4% rise in alterations and additions compared to a -14,3% dip in non-residential buildings.

But all is not doom and gloom as the seasonally adjusted real value of recorded building plans passed increased by 20,2% in the three months ended August 2017 compared with the previous three months. Increases were recorded for non-residential buildings (67,3%), additions and alterations (9,1%) and residential buildings (8,9%). Building plans passed are a strong indicator of the future health of the construction industry as a whole. And the latest figures indicate that we could be coming out of the doldrums. Let us hope that political upheavals don't capsize the boat between now and the coming new year.

The information above was garnered from Statistical Release P5041.1, selected building statistics of the private sector as reported by local government institutions (preliminary).

Report compiled by Bert van den Heever

To download P5041.1 click here.