After slipping by one point to 42 index points in the first quarter of this year, the business mood in the building sector fell by a further four points to 38 in the second quarter, the FNB/BER Building Confidence Index shows.

This level indicates that more than 60% of respondents across the building sector value chain are dissatisfied with prevailing business conditions.

In real terms, the total value of building investment continued to experience weakness in the second quarter of the year, after it contracted by an annual rate of 8.4% in the first quarter, following a 10.8% decline in the fourth quarter of 2025.

The business confidence of building subcontractors fell by 17 index points to 35 in the second quarter reading, owing to sharply lower activity.

“This is in line with the weaker activity among main building contractors, but also likely reflects softer demand for smaller projects. These would typically be initiated by the homeowner or landlord who is now facing rising costs and cutting back on discretionary spending,” says financial services firm FNB senior economist Siphamandla Mkhwanazi.

The softer sentiment reading during the second quarter shows that activity and overall profitability weakened substantially this quarter.

Sentiment among building subcontractors was particularly weak in the second quarter, having risen sharply in the first quarter reading, which reflects not only their exposure to weaker activity among main contractors but also the strain on consumer finances given the rising cost of living.

This has caused some households to hold off on smaller building projects and renovations.

“An overarching theme in this quarter’s results is the war in the Middle East, which saw input costs jump significantly between the first and second quarters. In some cases, projects scheduled to start were put on hold due to higher costs and general market uncertainty.

“If this impact was removed, sentiment would likely have remained stable or improved on its first-quarter level,” Mkhwanazi says.

Confidence among building material manufacturers in the second quarter increased by four index points quarter-on-quarter, and confidence among quantity surveyors increased by three points compared with the first quarter.

Confidence among architects dropped by three points, main contractors' and hardware retailers' confidence declined by four points and subcontractors' confidence declined by 17 points.

Further, while activity among non-residential builders surged in the first quarter, this change was reversed in the second quarter.

Additionally, the rating of the lack of new demand as a business constraint, which is a proxy for order books, was notably higher in the second quarter than in the preceding quarter.

“Work in the non-residential building sector has gained momentum since 2024, albeit off a low base. This momentum has been disrupted by higher internal costs and greater uncertainty linked to the war in the Middle East, which contributed to project postponements.

“Projects that are proceeding are also significantly less profitable than they otherwise would have been,” Mkhwanazi points out.

Meanwhile, the index shows that activity among residential builders was also noticeably down.

Work in this subsector has been persistently weak over the past few years in contrast to that of nonresidential builders.

Residential building activity looks set to improve noticeably during the year, from the perspective of the property sector and judging from building plans passed, he notes.

However, these second-quarter survey results indicate further weakness in available work.

A shift in interest rate expectations relative to the first quarter of the year has also likely added to the relatively downbeat sentiment, he adds.

Meanwhile, the index measuring average architect activity, while somewhat lower than in the first quarter, remained relatively resilient, says Mkhwanazi.

This suggests that early interest in building projects has been largely unaffected by geopolitical developments, although architect sentiment also moved lower.

The business mood among quantity surveyors rose to 46 from 43 in the first quarter reading owing a marked improvement in activity.

“In an environment of rising and uncertain costs, it is not surprising that quantity surveyors are experiencing stronger demand,” he says.

Further, building materials manufacturers noted a sharp increase in production costs this quarter. Sentiment increased to a still-low level of 23.

Meanwhile, hardware retail sales volumes remained relatively buoyant, despite declining, consistent with the four-point decline in business confidence, the index shows.