Building confidence down, but signs of hope
This is after the sector slowed in the first quarter of 2015 as well.
Although building confidence was lower in the second quarter, it remained at a level which indicates that the building sector continued to grow in the second quarter. However, growth proceeded at a more subdued pace, explained John Loos, FNB’s property economist.
More than half of the respondents are satisfied with prevailing business conditions.
Main contractor activity, both residential and non-residential, continued to deteriorate during the quarter. This resulted in lower profitability.
In contrast, hardware retail sales remained well supported, suggesting continued informal sector activity.
Therefore, despite the poorer performance by the sector in the second quarter, the outlook is somewhat more upbeat. This is mainly due to a marked rise in activity at the start of the building pipeline, which is gaining momentum.
According to Loos the noticeable improvement in the volume of work by architects in particular and quantity surveyors should see building construction regain some ground towards the latter part of this year and 2016.
“However, it is not to say that the rise in building planning activity will automatically translate into building construction as there are a number of potential stumbling blocks in between,” said Loos.
The biggest fall in confidence was registered by retailers of building materials. Their confidence was lower despite robust growth in sales and profitability.
“Retailers of building materials have been the best performing of the sub-segments of the building sector for more than a year, and, despite the fall in confidence, should continue to perform well this quarter”, said John Loos, FNB’s property economist.
“The results, particularly of residential main contractors, were disappointing. After ending 2014 on a relatively strong note, it is now clear that the recovery in the housing market has stalled somewhat.”
As a result of the weaker building activity, profitability was noticeably down.
Similarly, the business confidence of building sub-contractors was down, while confidence among building material manufacturers rose. The rise in confidence was largely due to an improvement in domestic sales and production. Export sales in contrast, were much weaker.
“The manufacturing sector in general is facing tough trading conditions and hardware manufacturers are no different. So, although confidence is up this quarter, it may not be sustained,” cautioned Loos.