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Building plans show significant strain in the residential property market. |
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Data released by statistics South
Africa shows that the value of real building
plans passed fell by 24.5% y/y in June from the previous month's decline of
35.5%. In H1 08, the real value of building plans passed was 10% lower than
during the comparable period in 2008.
In the detail, residential building
statistics not only confirmed the slowdown in the housing market, but also
point to continued weakness in the residential property market into 2009. The
real value of residential buildings completed fell 13.3% y/y and that of
building plans passed declined 18.7% y/y in H1 08. Even though the housing
market is being weighed down by consumer budgets being under pressure from a
tighter credit environment, slower real income growth and lower levels of
consumer confidence, GDP data suggests that overall construction activity is
holding up relatively well. In Q2 08, the construction sector expanded at an
annualised 13.5% q/q (10.6% y/y) from 13.9% (14.9% y/y) in Q1 08. In our view,
the slowdown in residential investment, and to some extent, the slower growth
in private sector non-residential investment, will detract from GDP growth in
the coming quarters. However, the government's infrastructure spending
programme should pick up some of the slack. We expect real GDP growth to slow
to around 3.5% in 2008, markedly slower than the average 5% growth rates
recorded over the past four years.
ABSA
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