The FNB/BER Building Confidence Index jumped to a 10-year high of 43 in the fourth quarter of this year, up from 35 in the third quarter.

However, despite the uptick, the current index level still means that the majority (more than 55%) of respondents are dissatisfied with prevailing business conditions.

The newest composite index benefitted from a 21 index point rise in sentiment among hardware retailers off the back of improved sales.

The uptick in activity among main contractors, led by residential builders, as well as among architects, was however, also encouraging.

“There is reason for cautious optimism about the prospects for the building sector next year,” says FNB senior economist Siphamandla Mkhwanazi.

“While there are still a number of hurdles to sustained growth, lower interest rates, faster economic growth and better momentum on structural reform – not to mention the very low base – could see noticeably more pronounced growth.”

Looking at each element of the index, Mkhwanazi says the jump in hardware retailer confidence returns the index to more or less the level registered at the start of the year, and reaffirms some of the broader trends regarding the resilience of the South African consumer.

“Household income has benefitted from lower inflation, lower interest rates – including the November cut, although it is too soon for that to add to sales, but potentially to sentiment – and continued two-pot withdrawals.”

Following a decline to 18 in the third quarter of this year, the business confidence of building materials manufacturers rose by 14 points, to 32.

This is the best level since the first quarter of 2022.

Main contractor confidence declined to 39 in the newest index, from 46 in the third quarter.

Sentiment moved lower despite improved activity and overall profitability.

Expectations for activity next quarter were, however, noticeably up.

“The underlying trends are still promising,” says Mkhwanazi.

The index measuring growth in residential building activity showed an encouraging increase.

However, keener tendering price competition meant that growth in overall profitability remained relatively downbeat.

These competing factors resulted in an unchanged business confidence reading.

The non-residential builder confidence was also stable – at 50 – in the fourth quarter, despite weaker activity and profitability.

“Non-residential building work has gained some momentum in recent quarters, but the level of investment (in real terms) is still below that of the 2010s,” says Mkhwanazi.

“With this base and the broader improvement in macroeconomic fundamentals, it is unlikely that the softer activity reading this quarter reflects a decline in work. Rather, it suggests a slowdown in the growth profile.”

According to Statistics South Africa, real investment in buildings was down 9.6% year-on-year in the third quarter of this year, which is an improvement compared with the 10.7% contraction in the second quarter of the year.

On a quarterly basis, building investment was up 1.4%. The survey results point to a similar performance in the fourth quarter.

The business sentiment of architects was up eight points in the newest index, boosted by better business conditions and activity.

In contrast, quantity surveyor activity was sharply down, however, business confidence held up well.

“The building pipeline provided mixed results in terms of upcoming work and suggests that there is at least some activity likely to move along the value chain,” explains Mkhwanazi.

Subcontractor sentiment registered a significant 10-point increase.

The FNB/BER building confidence index covers the entire building pipeline, from planning (represented by architects and quantity surveyors), renovations, additions, owner-builders, the informal sector (represented by building material and hardware retailers) and production (manufacturers of building materials), to the actual construction of buildings by main contractors and subcontractors.