Stats SA today reported a good improvement in residential building activity in terms of the number of SQM of building plans reported as completed in the month. While there has been permanent damage done to the non-residential industry, the housing market has been a lot more robust. In a month where there was a 7.5 percent increase in building plans completed overall, compared to the same month last year, it was the 550 000 SQM of residential buildings that boosted the overall figures. Importantly, the housing market completions is higher than the same month in 2019, before the pandemic, where 520 000 SQM were reported as completed. The same definitely cannot be said for the non-residential market, as the commercial building industry remains under huge pressure, with record office vacancies reported, as well as a lack of robust demand for retail buildings.
In terms of activity levels, over the last 12-month period, there has been a 20.8 percent increase in plans completed of residential buildings, while the non-residential industry is just not recovering into positive territory after the record lows of 2020, with a contraction in plans completed of 1.0 percent over the last 12 months, so staying at those rock bottom levels. The longer-term growth rate will definitely improve for non-residential buildings in coming months, but the point is that the segment will get nowhere near pre-pandemic levels.
In terms of building plans approved, which is a leading indicator of building in the pipeline, the figures were not as good as previous months, when we started to see quite a good improvement. The figures were more muted in October, as the interest rate hike came into effect, and the economy continues to falter. The number of SQM approved was lower than in 2019, but was 5.5 percent higher than the same month last year, in Covid ravaged 2020. This was composed of an increase of 5.9 percent and 4.1 percent for the residential and non-residential industries respectively. For the non-residential market, it was a much better month for the office space segment, which saw over 80 percent increase in plans approved in October y-y, coming off an extremely low base however, as there were only 13 000 SQM approved in the month, which is extremely low. The same cannot be said for the retail segment, which saw a decrease of over 80 percent, while the industrial segment was down by 7.1 percent in the month, with 95 000 SQM approved, which has still been operating at a much higher level than the other non-residential segments. In the of the housing market, it was the low cost housing segment (free standing dwellings smaller than 80 SQM) that saw good growth of over 150 percent, off a low base in October y-y. The luxury housing segment saw growth of 1.6 percent y-y, while the flats and townhouse segment saw a decline of 20 percent in the month.
Overall it was a disappointing month for SQM approved, which lost a lot of momentum from previous months, and hopefully is not some sort of turning point in terms of pent up demand starting to dry up. While the economy is recovering from the lows of 2020, there is little evidence to suggest the economy is going to get back to anywhere near pre-Covid levels anytime soon, as the economy remains in crisis, with record high unemployment, as well as the Omicron variant further dampening demand.
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