The First National Bank (FNB)/Bureau for Economic Research Building Confidence Index, which measures sentiment in the building sector, rose to 40 in the third quarter, from 35 in the previous quarter.

While the level of confidence continues to improve, the majority of respondents, at 60%, are still dissatisfied with prevailing business conditions.

The residential building sector continued to underperform this quarter, while work for nonresidential builders showed a noticeable improvement.

Importantly, the building pipeline suggests that there is good cause for optimism regarding the medium-term prospects for the building construction sector, FNB points out.

Compared with the second quarter, building material manufacturers gained 16 points, architects 12 points, hardware retailers ten points and subcontractors three points, while main contractors lost six points and quantity surveyors ten points.

Despite a slight uptick in activity, main contractor confidence decreased to 41 in the third quarter, from 47 in the prior quarter.

According to Statistics South Africa, the real value of residential building investment contracted by 7.3% year-on-year in the third quarter.  

A smaller decline of 3.7% year-on-year was registered for nonresidential investment.

The latest survey results suggest that, at least in terms of work, nonresidential builders continued to fare better than their residential building counterparts in the period under review.

“The weakness in residential building activity reflects the downbeat trends in the housing property sector.

“Moreover, the cessation of loadshedding since March has reduced demand for residential energy installations, an important source of work for the sector in the recent past. Meanwhile, demand for nonresidential buildings is faring better, but off a low base,” says FNB senior economist Siphamandla Mkhwanazi.

Subcontractor confidence was three points higher quarter-on-quarter, at 41.

While the results in terms of building activity this quarter were relatively mixed, especially when looking at the subsectors, work at the start of the building pipeline was much more upbeat, FNB points out.

The average activity indicator for architects rose to well above its long-term average.

As a result, confidence was up 12 points to 45 in the period under review, in line with the long-term average.

“Given the level of activity, one would have expected confidence to rise by even more. However, respondents are increasingly concerned about the delays at municipalities regarding plan approvals which is hindering their progress on projects,” Mkhwanazi avers.

Activity among quantity surveyors also moved higher; however, confidence lost ten points to register a level of 37.

Building material manufacturer confidence rose to 16 following two consecutive readings of zero.

Production increased, but, notably, the increase in production costs moderated.

Better sales growth, off a very low base, helped support sentiment among hardware retailers. At 57, confidence is now at its best level since 2022.

“While the outlook for activity is encouraging, a number of constraints continue to weigh on sentiment in the sector such as delays in municipal approvals and  crime and extortion (that is, the construction mafia). These will need to be addressed to ensure that projects can progress and be completed on time and within budget,” Mkhwanazi says.

The fieldwork for the third-quarter survey was conducted between August 7 and 26.