Gauteng Business News

Send  Share  RSS  Twitter  10 Dec 2014

INDUSTRY: Building Confidence at More Than 6-year High in 4Q2014


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After edging up to 45 points in 3Q2014, the FNB/BER building confidence index increased by 15 points to 60 in 4Q2014. “This is the highest level of the index since the beginning of 2008 and confirms that the building sector is in the midst of a revival” said John Loos, property economist at FNB.

The current level indicates that more than half of the respondents are satisfied with prevailing business conditions.

The rise in confidence was broad-based with 4 of the 6 sectors included in the index registering higher confidence. In the remaining 2 sectors confidence was unchanged.

Main contractor confidence jumped to 66 index points in 4Q2014, from 53 last quarter. Confidence of both residential and non-residential contractors rose by double digits during the quarter. However, according to Loos, “although confidence in both sectors improved, the residential market is looking far more buoyant than the non-residential market, a trend we picked up last quarter already.” The growth in residential building activity accelerated nicely in 4Q2014. This in turn boosted overall profitability.

In contrast, non-residential building activity weakened. “Confidence was higher on the expectation that building activity and profitability will improve in 2015” said Loos.

Sub-contractor confidence rose by 3 index points to 50 in 4Q2014.

The continued improvement in the residential market has boosted activity in other building related sectors. Retail sales and orders of building material remained robust. As a result, the confidence of retailers of hardware was unchanged at a high 74 index points. Loos noted that “while other retailers are still under pressure, retailers of hardware have benefitted from the recovery in the building sector.”

Continued growth in domestic manufacturing sales and production lifted the confidence of manufacturers of building material.

Looking ahead, the amount of work conducted by architects and quantity surveyors was generally higher during the quarter. As a result, architect business confidence remained at just under 50 index points while that of quantity surveyors rose to 60 index points in 4Q2014. “The increase in pipeline activity supports further growth in building activity in coming quarters” said Loos.

In conclusion: According to the survey, the recovery in residential building activity recorded in 3Q2014 gained noticeable momentum in 4Q2014. This boosted work along the rest of the building value chain. However, non-residential building work slowed further.

Furthermore, the rise in activity along the building pipeline suggests that the current recovery is sustainable. However, impending interest rate hikes may halt this fledgling recovery before it can gain more significant traction.


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