Following a decline for the last two quarters, and after having reached an eight-year low of 25 in the first quarter, the First National Bank (FNB)/Bureau for Economic Research Building Confidence Index rose by four points to 29 in the second quarter.
“While confidence is marginally higher, it still suggests that the vast majority of firms in the building sector are dissatisfied with current business conditions,” commented FNB property economist Siphamandla Mkhwanazi.
He said a sustained improvement in the building sector would only occur if the property cycle moved away from the current environment of subdued growth in house prices and rentals, in the case of residential buildings, and high office and shopping centre vacancy rates and low rental return on investment, in the case of the nonresidential sector.
During the second quarter, four of the six subsectors registered higher confidence, led by subcontractors. The confidence of architects was unchanged, while that of quantity surveyors was lower.
The confidence of main contractors regained some of the losses registered in the first quarter, rising to 30 in the second quarter from 23 in the first quarter.
“The somewhat higher confidence among main contractors was supported by a mild improvement in building activity. That said, activity still remains weak,” noted Mkhwanazi.
Subcontractor activity growth remained weak, however, confidence doubled to 43, from 21 in the first quarter.
Mkhwanazi said confidence could retreat again in the coming quarters, as nothing in this quarter’s survey data supported the higher optimism.
Architect confidence was unchanged at 36 in the quarter, with average activity moving largely sideways following the marked improvement in the first quarter.
Activity among quantity surveyors was also better, however, confidence dived to 16 index points in the quarter.
The confidence of manufacturers of building material and hardware retailers was recorded at 22 and 24 index points, respectively. In both instances, activity deteriorated, in line with the still poor growth in building activity.
Overall, on a yearly basis, growth in building activity likely remained as weak as in the first quarter.