Building industry picking up

The Gauteng and Western Cape housing markets are busy lifting their heads. This is according to construction economist Dr Johan Snyman of Medium-Term Forecasting Associates, after cement sales in the two provinces showed some improvement.

He says cement sales are a good indication of the state of the building and civil construction industry.

The Western Cape has for the past 29 months experienced negative growth in cement sales. In August growth was 33% down year on year, after which it gradually began to improve, explains Snyman.

The Gauteng decline was not as steep as that in the Western Cape, and at the May lows it was 23% down year on year.

The residential building market represents about 60% of countrywide cement sales and, in light of the fact that the civil construction market has done very well in the past couple of years, one can conclude, reckons Snyman, that the decline in sales mainly indicates a collapse in residential construction.

He ascribed the improved figures chiefly to the five-percentage-point decline in interest rates and the relaxation of banks' lending criteria.

Consumers' income also plays a role in their ability to undertake construction. Snyman says salaries are expected to rise 6% to 8% next year, but people's disposable income could nevertheless stock exchange severely impacted by large hikes in electricity prices.

Cement sales in KwaZulu-Natal have remained relatively stable, with a 6% year-on-year decline in July 2008, when they bottomed. In the Eastern Cape sales soared in 2003, possibly because of activity related to the development of the Coega harbour. They have since been reasonably stable.

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