The FNB/BER building confidence index rose by one point to 41 in the first quarter of 2025, up from 40 in 2024’s fourth quarter, indicating a marginal improvement in sentiment within the construction sector.
This is according to new data released on Monday.
However, despite this increase, the majority of respondents — nearly 60% — remain dissatisfied with business conditions.
The building confidence index is a barometer of sentiment within the construction sector, with 0 indicating an extreme lack of confidence and 100 indicating extreme confidence.
The construction sector plays a vital role in the economy contributing R103.47bn to the country's GDP in 2024, according to Stats SA. This accounted for 2.22% of total GDP.
While the overall index remained largely unchanged, confidence levels varied across different industry participants.
Hardware retailers, quantity surveyors and building subcontractors registered an increase in sentiment, whereas main contractors, architects and building material manufacturers reported a decline.
After recording a strong performance in the final quarter of 2024, activity among main building contractors deteriorated notably in the first quarter of 2025.
This decline put significant pressure on profitability, with the confidence index for main contractors falling by six points to 45.
The latest data from Stats SA reflects this slowdown, showing a 2.6% year-on-year decline in real building investment during the last quarter of 2024.
The downturn was largely driven by an almost 6% drop in residential building investment, whereas nonresidential building investment grew by 4.7% year on year.
Architects increasingly consider municipal inefficiency as hindering business operations
— Siphamandla Mkhwanazi, FNB senior economist
FNB senior economist Siphamandla Mkhwanazi noted that nonresidential building activity continued to outperform residential construction.
“The industrial and warehousing subsector has held up well over the past few years, supporting at least some nonresidential building work. Now, we are seeing signs that demand for retail space — and to a lesser extent, office and banking space is picking up too, which further supports the nonresidential outperformance,” Mkhwanazi said.
However, he noted that the residential sector was struggling, despite the cumulative 75 basis points drop in the repo and prime rate since the end of last year.
Despite the slowdown in activity and profitability, main contractors remained optimistic about their business prospects for the next quarter, expecting an improvement in activity levels, employment and profitability. But Mkhwanazi cautioned that if those expectations did not materialise, sentiment could take a further hit.
Confidence among architects fell for the second consecutive quarter, declining to 38 in the first quarter. This drop came despite an increase in activity suggesting other factors were weighing on sentiment.
One such concern is municipal inefficiency, particularly delays in approving building plans.
“Better activity at the start of the building pipeline signals more projects in the future and aligns with building contractors’ expectations of increased work next quarter. However, architects increasingly consider municipal inefficiency, such as delays in getting building plans passed and approved, as hindering business operations,” explained Mkhwanazi.
In contrast, quantity surveyor confidence increased by four points, even though their activity levels deteriorated.
Hardware retailers recorded the highest confidence levels in three years, rising to 59 points, driven by strong sales growth.
According to Mkhwanazi, the hardware retail sector underperformed other retail categories last year, but sales over the last two quarters have benefited from lower interest rates, easing inflation, and financial boosts to households from recent retirement reforms.
Confidence among building subcontractors also improved slightly, rising to 42 as a result of higher activity levels.
While building material manufacturers saw an increase in activity, their confidence declined by two points to 16, as rising production costs put significant pressure on profitability.
Overall, in the first quarter, the FNB/BER building confidence index reflected a sector experiencing mixed conditions. While contractors anticipate more work in the coming months, risks remain, particularly if demand does not increase as expected.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.