Strike hits building confidence

FNB's John Loos says domestic demand for building materials has fallen although margins are slightly higher. Image: SA Commercial Property News

The current level indicates that about 60% of respondents are dissatisfied with prevailing business conditions. "The slowdown in domestic demand is partly due to the prolonged labour unrest in the platinum sector‚" FNB property economist John Loos said.

Loos said the 11-point drop in overall building confidence was largely due to a sharp fall in the confidence of building material manufacturers. "The decline in confidence was largely because of weaker domestic demand. Domestic sales and orders received were significantly lower than in the first quarter‚" he said.

However‚ on the positive side the export market remained buoyant‚ but this was not enough to boost confidence. Although exports‚ mainly to the rest of Africa‚ remained robust‚ volumes were small by comparison with the domestic market.

The weakness in the domestic building sector was further reflected in the activity of main contractors. Building activity for both residential and non-residential main contractors declined during the quarter. As a result‚ the confidence of main contractors edged lower to 45 index points in the second quarter‚ from 49 in the first.

"While a further decline in residential building activity was expected‚ the slowdown in nonresidential activity‚ which up until now helped lift the sector‚ was surprising. This will certainly weigh on the outlook‚" said Loos.

Despite the fall in activity‚ overall profitability improved. Loos said this was possibly because firms increased their margins‚ especially in the residential sector. However‚ given the continued weakness in building demand‚ it was possibly not sustainable.