South African property development in a slump, even in the Western Cape
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Preliminary data from Statistics South Africa reveals a concerning decrease in the value of building plans passed by the country’s larger municipalities. The 11.9% drop in year-on-year capital value impacted the residential segment the most, with the value dropping to R39.16 billion, a 16.4% decline.
This constitutes a decline of R10.33 billion, taking the total down to R77.57 billion compared to the same period the previous year. Completed buildings also saw a dip of 19%, amounting to R41.4 billion, while building additions and alterations declined by 49.7% to R6.65 billion.
The South African Property Owners Association (SAPOA) expresses concern about the ripple effects on the economy, and they expect fewer job opportunities and less revenue for local authorities. SAPOA CEO Neil Gopal attributes the decline to the general decay in the country, including slow growth, high unemployment, poor wage growth, and crumbling infrastructure, which repels investors.
High interest rates and municipal rates are also choking the sector. Residential properties bear the brunt of the decline, while office and banking spaces show positive momentum, increasing by 1.5% to R16.48 billion.
The office sector reports improvement, with the value of building plans more than doubling to R2.5 billion. Plans for shopping spaces also grew by 8.6% to R3.64 billion.
On a provincial level, KwaZulu-Natal experienced a significant drop (37.5%) in the value of new building plans. Even the Western Cape and Gauteng recorded declines, contributing to the sector’s concerns.
SAPOA emphasizes that the sector’s recovery hinges on addressing issues like the construction mafia, infrastructure failures, and persistent power cuts.
Gopal anticipates a potential upturn in business sentiment in 2024, if interest rates drop, electricity supply increases, SAPS gets its act together and government infrastructure spending goes smoothly.
This, however, would be out of line with past and present behaviour.
Independent news and opinion articles with a focus on the Western Cape, written for a more conservative audience – the silent majority with good old common sense.
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