Business

Building sector confidence gains strength, but respondents not happy

Confidence in the building sector has seen an uptick in the third quarter of 2024, however 60% of respondents are dissatisfied with prevailing business conditions.

The FNB/BER Building Confidence Index, which measures sentiment in the building sector show that sentiment grew to 40 points, from 35 points in the second quarter of 2024. Only two of the six sectors recorded a decline.

The index is based on building industry professionals such as material manufacturers, architects, hardware retailers, sub-contractors, main contractors and quantity surveyors. The professionals are asked to indicate their level of confidence in the industry, using a scale of 0 to 100.

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A score below 50 points indicates a negative confidence, and a score above 50 points indicates a positive confidence.

Decline in some building sectors

Siphamandla Mkhwanazi, FNB Senior Economist, says main contractors and quantity surveyors’ confidence decreased in the third quarter by -6 and -10, respectively. Main contractor confidence sits at 41 points, from 47 points in the second quarter of 2024.

“According to Statistics South Africa (Stats SA), the real value of residential building investment contracted by 7.3% year-on-year (y-o-y) in the second quarter of 2024. A much milder decline (of 3.7% y-o-y) was registered for non-residential investment.”

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He adds that the weakness in residential building activity reflects the downbeat trends in the housing property sector. The demand for non-residential buildings is faring better, but off a low base.

“Activity among quantity surveyors also moved higher, nonetheless, confidence shed 10 points to register a level of 37 in 3Q 2024.”

ALSO READ: Building sector confidence plummets in first quarter, no hope for future

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Plan approval delays by municipalities

When it comes to sub-contractor confidence, the sector recorded 3 points, which moved confidence to 41 points. Architects confidence rose by 12 points, lifting it to 45 points in the third quarter. Mkhwanazi says confidence increasing for architects is in line with the long-term average.

“Given the level of activity, one would have expected confidence to rise by even more. However, respondents are increasingly concerned about the delays at municipalities regarding plan approvals which is hindering their progress on projects.”

ALSO READ: 7 out of 10 businesses dissatisfied with business conditions

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Highest growth

The highest confidence was recorded in building material manufacturer by 16 points, this follows two consecutive readings of zero. He says production increase, and the increase in production costs moderated.

“Better sales growth, off a very low base, helped support sentiment among hardware retailers. At 57, confidence is now at its best level since 2022.

“While the outlook for activity is encouraging, a number of constraints continue to weigh on sentiment in the sector such as delays in municipal approvals and crime and extortion (i.e. the construction mafia). These will need to be addressed to ensure that projects can progress and be completed on time and within budget.”

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By Tshehla Cornelius Koteli