Building confidence falls to lowest level since 2000
Tuesday, 15th June 2010The FNB building confidence index fell to 24 in the 2nd quarter of 2010, from 30 in the preceding quarter and 30.2 in the same quarter of 2009. This is the lowest level in the index since the 4th quarter of 2000 when it was at an all time low of 22.7. Confidence levels in the building industry are affected by the sharp downturn in new projects, including a contraction in residential developments, commercial building activity as well as a delay in the implementation of government projects. High interest rates, coupled with the global recession, higher debt levels and spirally house prices, seriously affected consumer's affordability, and although house prices have started to improve, liquidity has not yet been restored. Housing demand falls firmly in the affordable housing category, but developers have been relatively slow to react, as consumers financial position has not fully recovered to the extent where mortgage finance can be accessed. Buying existing property is still more affordable compared to building, due to the increase in the supply of houses up for sale in recent years. The outlook for new housing construction is not expected to improve in 2010, with some hope that conditions will improve towards the second half of 2011. Commercial building activity has slowed, as large projects are completed with no projects of similar financial magnitude available to fill the void. This has affected the construction of offices, industrial as well as shopping space. Major government projects, including the construction of prisons several large hospitals have been postponed until 2012/13.
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