The majority of people in the building industry are still unhappy with the current state of business, despite the fact that attitude may be improving.Access to capital remains a perennial challenge for South African construction businesses. In short, high-interest rates make financing expensive. Volatile cash flows in the project-based sector also necessitate access to working capital and bridging finance
The FNB/BER Building Confidence Index increased from 28 points in Q2 2023 to 34 points in Q3 2023, a six-point increase.
The present index level indicates that more than 65% of respondents are unsatisfied with the current business conditions. The index ranges from zero, which indicates an extreme lack of confidence, to 100, which indicates extreme confidence.
Compared to Q2 2023, the following shifts in confidence were noted:
1. building material manufacturers (+13),
2. quantity surveyors (+13),
3. architects (+7),
4. building sub-contractors (+7),
5. main contractors (-2) and
6. hardware retailers (-2).
Furthermore, the core building confidence index increased to 39 in Q3 2023, which, along with Q1 2023, is the highest reading since Q2 2018. This measure excludes building material manufacturers and hardware shops.
The improved sentiment among non-residential builders, which comprises primary and subcontractors, increased from 42 in Q2 2023 to 52 in Q3 2023, according to FNB, marking the most remarkable jump in the quarter.
This uptick in company sentiment was supported by both a notable improvement in profitability and ongoing activity growth.
The demand for industrial and retail space is driven by the manufacturing and retail sectors, which are constrained, among other factors that make up the sluggish non-residential real estate market, according to Siphamandla Mkhwanazi, Senior Economist at FNB.
“Order books are looking more promising, and new building activity is robust despite this.” The recovery of non-residential building activity is being caused by a number of variables, such as low technical base effects, semi-gration of enterprises to the Western Cape, and potential continuous retrofitting of office space post-COVID and to deal with the energy crisis.
FNB said that residential building activity also improved. However, business confidence dropped to its lowest level this year, while the rating of the lack of new demand as a business constraint (a proxy for order books) stayed high.
“With the exception of some regions, mainly in the Western Cape, the residential property sector is struggling due to weak demand amid restrictive monetary policy. As a result, while there is work currently, the appetite for new residential buildings is starting to diminish somewhat,” Mkhwanazi said.
Moreover, the activity at the start of the building pipeline was somewhat weaker in Q3 2023.
Nevertheless, the confidence of architects and quantity surveyors also grew to 30 and 39 index points, respectively. Sentiment amongst quantity surveyors has been lifted by expectations of improved
