Property Talk

If you are involved in the supply or delivery of new residential homes then the Absa Residential Building Statistics report provides an excellent overview of the market and what has been happening on the supply side for the period from 2007 to 2016.

The building plans approved each year provide a good indicator of planning activity and what can be expected in the market over the short to medium term. It is interesting to see that since 2009, the total annual number of building plans approved in South Africa has varied within a very narrow band around the 55,000 units per year. The crazy boom years of 2007 and 2008 delivered plans approved of 102,691 units and 85,217 units respectively.

We wish for those levels of activity nowadays. Absa divide their building statistics into three main categories: Houses below 80 sqm, Houses above 80 sqm and Flats & Townhouses. I am not sure what is significant about the 80 sqm threshold, but there are very few freehold homes we come across within our trading areas along the Dolphin Coast that fall into the below 80 sqm category.

The building plans approved for 2016 were down significantly on the prior year for the small homes (< 80 sqm) with 17,318 plans approved compared to the 22,783 approved in the prior year (a 24% decline). For the homes above 80 sqm the total building plans approved were 15,896 for 2016, and this was 6,4% below the 16,981 approved in 2015. The plans approved for flats and townhouses in 2016 showed year-on-year growth of 13,4% to 22,929 units from 20,215.

This gives us some insight into where the developers have been focusing. If you look at actual buildings completed for the period 2007 to 2016 a slightly different picture evolves. This is understandable as the lead times between plans being approved and the actual completion of the homes can range from 12 months to far longer. Since 2010 in South Africa on average around 40,000 new homes are completed each year according to the Absa figures. Last year 13,691 flats and townhouses were completed which was 19.1% up on the year before.

What I found very interesting was the provincial breakdown of plans approved and buildings completed. KZN accounted for 770 completed homes above 80 sqm and 762 completed flats and townhouses in 2016 which represented 6,3% and 5,6% of those markets nationally. So where is most of the building and plan approval activity in the country happening The quick answer is the Western Cape and Gauteng.

The Western Cape accounted for 3,499 completed homes above 80 sqm in 2016 representing 28,6% of the national market and Gauteng accounted for a lion's share of 4,601 completed homes or 37,6% over the same period. Looking at flats and townhouses the Western Cape delivered 4,265 units last year or 31,2% of the new national stock and Gauteng produced 5,833 units or 42,6% of South Africa's total new flats and townhouses over the same period.

This trend and area of building activity is unlikely to change soon as the Western Cape had 29.1% share in all new residential plans approved in 2016 and Gauteng accounted for 31.5% of all new building plans approved. I found it interesting that the Western Cape is almost as significant as Gauteng in terms of development activity in South Africa.

This would mean that any supplier of a service or product to the development of residential real estate would as a matter of course have to be well represented across the Western Cape and Gauteng in order to be a major player within the industry. With over 70% of the market in new homes delivered and over 60% of new plans approved Gauteng and the Western Cape have established themselves as the power regions in South Africa.

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.