After gaining one index point in the first quarter of the year, the FNB/BER Building Confidence Index fell by five points to 36 in the second quarter.

The current reading means that almost 65% of respondents are dissatisfied with prevailing business conditions.

Compared with the first quarter, there were a number of changes in sentiment – building material manufacturers (+9), quantity surveyors (+4), building subcontractors (-9), main contractors (-10) and hardware retailers (-24).

The business confidence of architects was unchanged.

Main contractor confidence fell to 35 in the second quarter – the lowest level since the third quarter, 2022.

Underpinning the decline was worsening sentiment in the residential sector, on the back of a further drop in activity. Non-residential building activity remained somewhat more resilient.

Data from Statistics South Africa (Stats SA) show that the real value of spending on residential buildings was already down 8.4% year-on-year in the first quarter of the year.

“The residential building sector is under pressure. Respondents noted a deterioration in activity and overall profitability,” remarks FNB senior economist Siphamandla Mkhwanazi.

“Moreover, a deterioration in order books points to continued strain on activity over the short term.”

Activity in the non-residential building sector also declined, but remains above the long-term average.

According to Mkhwanazi, the non-residential building sector is now outperforming the residential building market significantly in terms of growth.

“This is partly because of the very low base caused by years of decline, and also due to the more tangible recovery in demand for industrial and office space.”

While actual building activity was weaker in the second quarter as a result of the poor performance of the residential segment, the outlook seems to be improving.

The index measuring work among architects was significantly above average for the second consecutive quarter.

Nonetheless, their business confidence was unchanged at a relatively subdued 38.

Sentiment among quantity surveyors rose to 50, its best level since the second quarter of 2017.

“Work at the start of the building pipeline (architects and quantity surveyors) is clearly gaining momentum. However, like with current activity, it seems as if it is largely focused on the non-residential sector,” says Mkhwanazi.

“Moreover, any progress in terms of building activity will be stifled by long delays in project approvals and client payments.

“Also worth noting is that the extent to which this is realised in terms of work will depend on further improvements in economic growth and building demand.”

Last quarter, hardware retailers recorded the largest increase in business confidence. This quarter, they registered the biggest decline.

This turnabout in sentiment was owing mainly to a deterioration in profitability.

Even though sales volumes continued to do well, labour costs increased, which weighed on profitability.

Sales volumes are expected to remain buoyant in the third quarter of the year.

“Although hardware retailers are upbeat about sales next quarter, it is useful to remember that some of the factors that contributed to better sales in the preceding two quarters, particularly the consumer income windfall from the two-pot retirement system, will likely be less pronounced going forward,” says Mkhwanazi.

“This could lead to a disappointing outcome in the second half of 2025, despite the recent interest rate cut by the South African Reserve Bank.”

The business confidence of building material manufacturers gained nine points even though domestic and export sales and production deteriorated.