Building confidence rose to an eight-year high in the fourth quarter, reflecting increased activity in the building sector value chain — most notably among architects and hardware retailers.
The Building Confidence Index, which is compiled by FNB and the Bureau for Economic Research (BER), rose to 43 points in the period, and increase of 9 index points from the preceding three months, though the reading indicates that more than half of the respondents to the survey are still dissatisfied with business conditions.
The measure is indexed on a scale of 0 to 100 after surveying architects, quantity surveyors, main contractors, subcontractors. A reading above 50 indicates a positive mood by respondents.
Sentiment among architects jumped to 54, the highest since 2015, signalling apparent buoyant activity, though there was concern among respondents about the sustainability of the momentum given the still depressed conditions in the building industry, FNB senior economist Siphamandla Mkhwanazi said.
Confidence among hardware retailers also picked up, albeit off a very low base, suggesting the worst may be behind the sector after the Covid-related DIY boom and bust. The slump in DIY activity was reflected in declining sales by companies such as Cashbuild, which caters predominantly to low- and middle-income consumers.
Mkhwanazi said hardware firms have been the worst performers in terms of sales over the past few quarters as consumers sacrificed home improvements and other renovation projects for spending elsewhere. Some of that renovation demand appears to have returned during the review quarter, he said.
Building subcontractor confidence gained 11 points to 58, while that of building material manufacturers rose marginally.
The core building confidence index, which excludes building material manufacturers and hardware retailers, rose to 48.
Mkhwanazi said results of the survey were encouraging overall, given the poor condition of the entire building sector value chain.
In the case of the non-residential sector, profitability continued to trend higher.
“It is prudent, however, to highlight some concerns regarding the outlook for the building sector. First, the growth momentum seems to be normalising relative to the last few quarters. Secondly, the fundamentals in the residential property sector, especially weak house price growth, suggest that this segment may come under strain in the near future,” Mkhwanazi said.
“Indeed, the deterioration in orders books also points to that. Thirdly, even though activity at the start of the building pipeline was noticeably higher, not all of those projects will proceed to the construction phase, especially in an environment of relatively high interest rates.”
Confidence among main contractors was unchanged at 41.
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