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Building index at 7-year low
Confidence in South Africa’s building industry plunged in the fourth quarter as weak demand for property threatened profitability, a survey showed yesterday.
The FNB Building Confidence Index fell to 40 points in the fourth quarter, falling to below 50 for the first time since 2001, from 52 in the third quarter. “For various role-players, from architects to retail building material merchants, we find confidence down,” said Cees Bruggemans, chief economist at FNB.
“The underlying reason is the environment of higher interest rates, affordability problems …
“Aside of any supply problems that may exist in the building trade,” he said, “these factors are steadily pushing confidence levels lower”
Economic growth cooled to its slowest in a decade in the third quarter, and business and consumer confidence have fallen to multi-year lows, as the economy was hit by high interest rates and a global slowdown.
Tighter lending rules and a total 500 basis points increase in interest rates since June 2006 have heaped pressure on the residential property market.
However, the construction industry as a whole remains one of the fastest- growing in SA, boosted by government spending on big infrastructure projects to boost power and transport sectors ahead of the World Cup in 2010.
Bruggemans said players in the building industry are not expecting further weakness in the next quarter.
“Residential contractors do not expect further deterioration. Similarly, non-residential contractors also indicated expectations of no further major deterioration in business conditions, but that remains to be seen.”
The building survey was conducted by the Bureau for Economic Research between October 17 and November 14. |
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