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Building trust reaches four years high, thanks to recovery in smaller projects

The pipeline for construction projects remained stable during the quarter (Getty)

  • Confidence among companies in the construction sector has risen to its highest level in four years.
  • Confidence was boosted by the improved business mood among building materials manufacturers and sub-contractors.
  • But profit margins in the sector are still under pressure.

Confidence among construction companies has risen to its highest level in four years.

The FNB and the Bureau for Economic Research on Tuesday announced the building confidence index for the first four years. The index climbed six points to 40, from a score of 100 – indicating that confidence levels remained relatively weak.

The index examines the feelings of industry players such as architects, quantity surveyors, main and sub-contractors, building material manufacturers and retailers.

Building confidence levels are at their highest

Building confidence levels are at their highest since early 2018.

The lift in confidence is mainly driven by an improved business mood among building material manufacturers and sub-contractors.

Confidence among main contractors dropped from 30 to 25 points. But activity remained relatively stable, according to the report.

Among sub-contractors – such as plumbers, electricians, carpenters and shop fitters – confidence levels climb 17 points to 47. This is the best level since mid-2018, the report indicated.

“The results point to a strong view in terms of smaller construction projects, many of which would be seen as changes to existing structures rather than new buildings. This is why we see more optimism in building sub-contractors than main contractors,” noted Siphamandla Mkhwanazi, senior economist at FNB.

The activity among non-residential builders was also better, compared to the residential sector.

“Anecdotally, the (improved) activity of sub-contractors can also be linked to the increase in the number of office-to-home conversations and changes to existing homes,” Mkhwanazi explained.

The confidence of manufacturers of building materials jumped to 55 points – the same level as in the third quarter of 2021. However, production volumes took a dip. Sales of hardware also declined during the quarter. But the confidence of hardware dealers was at 63, above their long-term average.

“After the start of the lockdown in mid-2020, hardware retail sales increased significantly, encouraged by the DIY market. These results show that the need for home improvement is largely satisfied (by) those who ‘ t had the funds and trade is back to normal, “Mkhwanazi said.

However, profit margins are still under pressure due to high building material prices, and costs of interruptions at construction sites, Mkhwanazi said.

“If we look at the underlying survey data, there is a clear recovery in construction activity, especially smaller projects. While this is welcome, in value terms, it may not be enough to stimulate the sector meaningfully,” Mkhwanazi added.

For a “continuous improvement”, the demand for new buildings of weak levels must rise.

Building trust reaches four years high, thanks to recovery in smaller projects

Source link Building trust reaches four years high, thanks to recovery in smaller projects

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