afrol News, 20 October - The value of recorded building plans in South Africa during the first eight months of 2006 has increased by 16.3 percent compared with the first eight months of 2005, fresh statistics show. The ever-growing construction sector reflects South Africa's property boom and long stored housing demand.

According to the latest survey published by the government agency Statistics South Africa, building plans passed by larger municipalities had increased by 16.3 percent in value compared to last year. Large increases in the value of recorded building plans passed were reported for non-residential buildings (+31.6%), additions and alterations (+14.3%) and residential buildings (+12.6%).

Also, the value of buildings reported as completed had increased strongly during the same period, by 28.2 percent, or rand 5 billion. Completed residential buildings alone hade increased by 27.3 percent compared to last year.

The new statistics also show interesting new trends on where current investments in construction are taking place. The Gauteng province, which includes Johannesburg and Pretoria, alone stood for 38.8 percent of the value of recorded building plans, with Western Cape (Cape Town) coming second with 29.8 percent.

During the last year, growth was however strongest in the poorer and more rural provinces. The impoverished Mpumalanga province, along the Mozambican border, saw a 52.2 percent growth in the value of recorded building plans. Western Cape, where the boom had started, saw a slight decrease in new construction plans. Here, investments had decreased by rand 380 million.

The South African real estate market has been booming for several years, providing happy days for the national construction industry and property owners. Unlike many other property booms, the rising prices reflect an under-pricing of real estate during the apartheid era and an unsatisfied demand for more housing and commercial buildings.

Especially in the upper and medium range, there is an enormous demand, which to a large degree reflects the end of racial segregation in South Africa and the social climbing of those previously discriminated. So far, at least, speculations are not the main drive behind the boom.

South African real estate prices have more than doubled in the last five years, being one of the world's fastest growing property booms. Those being able to enter the property market in the early days of the boom, now have values by far exceeding their loans. Seeing how these early starters now are becoming privileged, many more want to enter the market as soon as possible, while constructions cannot keep up with the demand.

The new trend, as reflected by Statistics South Africa, is that the property boom now also is moving down-market. While the up-market sector is starting to get saturated - here the price explosion has started slowing down - the lower end of the market is now taking over the boom role.

According to the Affordable Housing Institute (AHI), properties costing less than rand 600,000 - below the national average property price of about rand 798,000 - now "find a buyer quickly and can be resold in a year or two at a 15-20 percent profit." In the up-market however, AHI was noting "a sobering market" and "a declining rate of house price growth."

By staff writer

© afrol News

Related pages and feature

Current afrol News Top Stories