Residential building plans fall 16.3% year on year in first two months of 2023

Data released by Stats SA on Thursday showed that building plans for non-residential buildings at current prices fell by 25.9% for the first two months of this year compared with the same period in 2022, while residential building plans fell by 22%. The one upside was plans passed for additions and alterations, which rose by 5.2%.  

It all adds up to a 16.3% decline in such building plans. In rand terms, such plans in January-February of this year amounted to almost R14.6-billion, compared to R17.4-billion in the corresponding period in 2022.  

For the three months to the end of February compared with the previous three-month period (September to November 2022), the decrease in total building plans passed was 17.6%, while the value of total completed buildings in rand terms for that timeframe declined by more than 20%.  

This is a trend that is concerning on a number of fronts.  



For residential building plans, rising interest rates against the backdrop of a stuttering economy have clearly played a role in the decrease.  

“The high interest rate environment is driving up debt servicing costs, weighing on already constrained consumers, diluting disposable incomes. Moreover, consumer confidence remains subdued,” said Investec economist Lara Hodes.  

It’s also interesting to note that plans for dwelling houses were down by 11.7% year on year in January and February, while plans for flats and townhouses fell by a steep 38.3%. The latter, especially, would involve significant work for contractors and clearly the demand for such residences is seen to be evaporating. That could create a shortage in the rental market as population growth in urban centres is hardly abating.  

The sharp decline in non-residential building plans is also explained by climbing interest rates and the sour economy — such projects are often financed by debt — and they may also be hampered by other factors such as the rise of the “construction mafia”. Dealing with mobsters is a disincentive to doing business.  

And overall, the power crisis is certainly not helping as construction sites often require a reliable supply of electricity.  

Another contributing factor may be the shambolic state of governance in many municipalities. Approving building plans requires a functional administrator. Stats SA pointedly noted that the “2022 and 2023 figures should be regarded as preliminary because of possible backlogs and incomplete reporting by municipalities”.  

That may help explain the dire situation in woefully governed KwaZulu-Natal, where building plans passed by larger municipalities tanked by more than 54% on an annual basis in the first two months of 2023.  

Among other things, it bodes ill for job-creation prospects as building and construction are labour-intensive sectors. But the foundations of this economy are not giving them much support. DM/BM