Executive summary Sensemaking update YTD Nov 2013
 

Executive summary Sensemaking update YTD Nov 2013

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In this summary of our latest Sensemaking Update we put into perspective the context of the Building and Construction Industry. We explain our whole systems approach to understanding the context and ...

In this summary of our latest Sensemaking Update we put into perspective the context of the Building and Construction Industry. We explain our whole systems approach to understanding the context and how the different components must be understood for strategic benefit. It assists strategic organisations to DEFINE and by implication, CONFINE their market. By redefining the market new and unexplored markets can be identified.

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    Executive summary Sensemaking update YTD Nov 2013 Executive summary Sensemaking update YTD Nov 2013 Document Transcript

    • BMI-BRSCU SENSEMAKING UPDATE DECEMBER 2013 (YTD NOVEMBER) We want to to remind Subscribers that we follow a whole systems approach to understanding the industry context and its linkages in the role of Building and Construction as an engine for growth and wealth creation in the economy with Property a preferred Investment. THE ROLE OF BUILDING, CONSTRUCTION AND PROPERTY IN THE ECONOMY: 2012 (R MILLION) (R MILLION) (R MILLION) The growth in GDP is determined by Listed Property (Market Cap) Residential Property (Units*Millilon) Formal Empl in Bldng & Constr 14.71 Investment in Gross R 210 997 427 162 R 5 371 483 Fixed Capital Formation, Land included Mortgage Advances which in turn is R 253 461 Urban Housing Backlog Non Res Property (m2*million) determined by 342 Mortgages Outstanding 2 819 535 Investment in Building R 1 331 060 R 1 064 971 Land included (Private and Public Residential and Non Inv in Affordable Housing Average Annual Housing Need (units) Investment in Building Residential and R 43 093 249 025 R 171 981 Unrecorded Additions and Alterations), and 4.84% 31.25% Government Budget Gross Domestic Product Gross Fixed Capital Formation Construction (as well as 29.75% 18.37% R 2 995 530 R 550 362 R 891 199 GFCF items unrelated to 31.81% building and construction such as Computer Transfer Duty Investment in Infrastructure (3 years) Investment in Construction related Equipment, R 3 870 R 1 058 207 R 175 093 Transfer costs, (Copyright) BMI-BRSCU Machinery and Equipment, and Transport Equipment) (See Slide 10 in the Industry Dashboard presentation). Investment in Building is of course influenced by Mortgage Advances (New and Existing buildings), Building Plans Passed and Buildings Completed, and Construction by Government Infrastructure spend. In this Sense-making Update for the YTD November 2013 as well as the Industry Dashboard we have analysed all the information for YTD Q3 2013 for MORTGAGE ADVANCES, GFCF as well as the first eleven months of 2013 for the other series (with 9 months for Domestic Cement). It therefore provides a good basis for understanding the past year as well as an indication of what can be expected in 2014. We of course monitor the actual performance against forecast and our interactive models provide the means of continuous updating of the outlook thus providing a very useful strategic monitoring system. The Sensemaking Update and the Industry Dashboard takes a holistic systemic view and it can be seen that the YTD Forecast for MORTGAGE ADVANCES for the Construction of New Buildings shows an increase on 2012 (but – 40.9% of the 2007 level); GFCF Residential, Non Residential and Total Building shows healthy growth and Construction is expected to decline. This of course has an impact on building material sales. The majority of other indicators indicate a turning point and the YTD Forecasts generally displays a growth pattern for 2013 vs 2012. • Mortgage Advances on EXISTING BUILDINGS, CONSTRUCTION OF NEW BUILDINGS, VACANT LAND and TOTAL GROSS NEW MORTGAGE LOANS AND RE-ADVANCES shows an average WEIGHTED INCREASE of + 3,43%
    • • • • GFCF RESIDENTIAL shows an INCREASE of + 9,93% GFCF NON RESIDENTIAL shows an INCREASE of + 7,86% GFCF TOTAL BUILDING shows an INCREASE of + 6,84% GFCF CONSTRUCTION shows an INCREASE of + 3,38% • Domestic Cement Sales shows a decrease of + 3,87% and • Local Building Lumber Sales shows an increase of + 7,14%. Residential BPP (in m2) recorded a decline of – 0,02% in 2012 vs 2011 and Non Residential BPP showed growth of + 2,06%. Total BPP (in m2) ended 2012 with marginal growth of + 0,66% compared to 2011. At this advanced stage of 2013 it is expected that the • Private Residential BPP (in m2) will increase by + 4,99% in 2013 vs 2012 while the • Private Non Residential BPP will increase by + 17,63% and • Total Private BPP will increase by + 8,96%. Residential BC (in m2) recorded a decline of -3,98% in 2012 vs 2011 and Non Residential BC showed growth of +5,58%. Total BC (in m2) ended 2012 with growth of + 5,58% vs 2011. Similarly it is expected that the • Private Residential BC (in m2) will increase by + 6,89% in 2013 vs 2012 while the • Private Non Residential BC will increase by + 16,42% and • Total Private BC will increase by + 9,85%. In the table below it can be seen that the Investment in Building Table that Private Sector (Residential and Non Residential) BC comprises just less than 35% of Total Investment in Building (the rest comprises Public Residential, Non Residential and Unrecorded Additions and Alterations). Nevertheless it is the MOST IMPORTANT, CURRENT INFORMATION AVAILABLE on the development of the Industry and this is the reason why we spend a considerable amount of time to analyse it exhaustively. INVESTMENT IN BUILDING: 2012: M2*1000 Sector and Segment Recorded* Recorded** Unrecorded PRIVATE AND PUBLIC M2*1000 M2*1000 Dwelling-houses < 80 m2 903 Dwelling-houses > 80 m2 2806 Townhouses & Flats 1105 Other (Incl. hotels & casinos) 46 Additions & alterations 1467 PUBLIC RESIDENTIAL Affordable Housing 10115 General Government 644 Public corporations 15 Private Business Enterprises 4305 TOTAL RESIDENTIAL PRIVATE NON-RESIDENTIAL Offices 463 Shops 499 Industrial & warehouse 1128 Other 201 Additions & Alterations 550 PUBLIC NON-RESIDENTIAL General Government 2801 Public Corporations 1120 Private Business Enterprises 5435 TOTAL NON RESIDENTIAL Unrecorded Res Adds and Alts 7907 Unrecorded Non Res Adds and Alts 755 GRAND TOTAL 9167 14319 18777 * StatsSA (Monthly 6 weeks in arrears) 21.69% 33.88% 44.43% ** SARB (Quarterly in arrears) 55.57% 44.43% Total M2*1000 903 2806 1105 46 1467 10115 644 15 4305 463 499 1128 201 550 Building Investment relates to both Private and Public Building and it is expected that Public Sector Residential and Non Residential will contribute to an overall increase of about + 2,18% in Total Investment in Building for 2013 compared to 2012 (in constant 2012 Rand Value). A detailed forecast of the Investment in Building and Construction for the period 2013 – 2020 (in constant 2012 Rand values) can be seen in the next Table. It can also be seen in the table following the forecast that Total Investment in Building is expected to 7907 average more than R193 755 Billion annually, whilst Investment in 42263 Construction is expected to average 100.00% 100.00% just more than R159 Billion per annum – thus a total investment in Building and Construction of nearly R353 Billion annually. This would translate into an Investment in Total Building and Construction of about R1,058 Trillion over the next 3 years, thus this top-down estimate of forecast investment provides some support for the much vaunted Infrastructure programme of Government. 2801 1120 5435
    • PROGNOSIS: INVESTMENT IN BUILDING & CONSTRUCTION: YTD ACTUAL VS FORECAST BY SECTOR AND SEGMENT (CONSTANT 2012 VALUES) 2011 2012* FC 2013 FC 2014 FC 2015 FC 2016 FC 2017 FC 2018 FC 2019 FC 2020 PRIVATE RESIDENTIAL BC - Dwelling-houses < 80 m2 22.68% -5.01% 1.00% 11.46% 6.54% 0.45% -0.46% 3.33% 2.02% -2.05% - Dwelling-houses > 80 m2 6.36% 1.78% 9.45% 3.78% -0.48% -5.88% -6.49% 7.55% 6.47% 2.52% - Townhouses & Flats -15.87% 12.67% 23.39% 7.53% 3.07% -2.57% -1.04% 18.44% 16.48% 11.54% - Other (Incl. hotels & casinos) -30.00% -66.88% 76.08% 22.39% 0.62% -4.83% -5.44% 8.77% 7.69% 3.71% - Additions & alterations 4.37% -18.55% 20.36% 1.63% -1.55% -6.93% -9.69% 3.65% 2.37% -1.68% TOTAL PRIVATE RESIDENTIAL BC 0.93% -4.45% 14.70% 4.87% 0.57% -4.88% -5.46% 8.95% 7.87% 3.88% PUBLIC RESIDENTIAL - Affordable Housing 15.02% 2.50% -2.65% -5.40% -1.95% 1.50% 2.00% 2.50% 3.00% 3.00% - General Government -20.94% -88.96% 5.79% 6.10% 7.90% -2.30% -4.50% 6.10% 8.20% 9.10% -76.92% 266.67% -1.09% 6.10% 7.90% -2.30% -4.50% 6.10% 8.20% 9.10% - Public corporations -20.77% -40.81% -26.18% 16.62% 65.59% 9.90% -0.58% -4.48% 10.49% 32.83% - Private Business Enterprises TOTAL PUBLIC RESIDENTIAL BC -7.76% -33.97% -8.03% -0.46% 14.17% 4.10% 0.76% 0.24% 5.75% 13.65% TOTAL RESIDENTIAL (Incl AH) BC -4.82% -23.37% 2.15% 2.22% 7.16% -0.24% -2.11% 4.12% 6.74% 9.05% 64.76% -34.08% 5.23% 6.75% 11.96% -1.05% -4.06% 4.94% 8.58% 11.87% TOTAL GFCF RES (Excludes AH) BC PRIVATE NON-RESIDENTIAL BC 12.61% 5.47% -4.89% - Offices -38.35% 25.20% 80.05% -15.44% 12.51% 8.63% 12.61% - Shops -5.68% -21.55% 19.78% -10.95% 18.51% 17.01% 17.50% 17.30% 9.69% -1.24% - Industrial & warehouse -19.09% 40.13% -9.07% -14.63% 13.64% -11.76% 7.11% 15.49% 2.83% -2.46% - Other 30.19% -22.04% 15.63% -17.85% 9.01% 11.92% -1.47% -19.57% -36.72% -4.89% - Additions & Alterations -11.52% -14.02% 21.88% -9.54% 20.28% 32.64% 16.12% 14.31% 10.19% -8.97% TOTAL PRIVATE NON-RES BC -15.86% 2.58% 23.55% -13.32% 15.42% 11.53% 12.76% 12.89% 5.75% -4.92% PUBLIC NON-RESIDENTIAL BC - General Government 13.04% 23.02% 22.55% 2.90% 8.00% 6.90% -7.00% -4.40% 6.80% 9.20% - Public Corporations -3.56% -37.41% -41.59% 2.90% 8.00% 6.90% -7.00% -4.40% 6.80% 9.20% -3.06% 6.16% 2.27% 11.62% 4.66% 4.53% -16.91% -16.06% 8.02% 21.85% - Private Business Enterprises TOTAL PUBLIC NON-RES BC 0.88% 9.48% 3.09% 7.93% 6.01% 5.51% -12.78% -10.87% 7.44% 15.85% TOTAL GFCF NON RES BC -3.80% 7.79% 7.86% 2.26% 13.63% 12.54% -1.41% 1.59% 13.57% 15.47% TOTAL GFCF RES AND NON RES BC -7.68% -13.46% 6.84% 3.97% 9.63% 3.76% -5.48% -0.34% 7.55% 9.91% - Unrecorded Res Additions and Alterations 4.37% -18.55% -27.92% 1.63% -1.55% -3.11% -1.18% 15.39% 3.25% -0.20% - Unrecorded Non Res Additions and Alterations -11.52% -14.02% 16.80% -9.54% 20.28% 11.88% 6.90% 6.90% 6.90% 6.90% TOTAL UNREC ADD'S & ALT'S BC 2.84% -18.18% -24.02% 0.13% 1.10% -0.95% 0.13% 13.92% 3.84% 0.99% TOTAL INV IN BUILDINGS COMPLETED -2.68% -12.58% -1.88% 1.85% 6.48% 2.67% -3.60% 2.48% 6.23% 7.35% BC as % of Total Inv in Bldng 23.38% 26.15% 31.36% 30.32% 29.95% 29.37% 30.89% 33.34% 33.57% 31.32% Priv Sector as % of Total Inv in Bldng 48.57% 49.73% 49.62% 48.27% 46.99% 45.81% 47.97% 52.32% 52.13% 48.78% CONSTRUCTION - General government -2.45% -6.00% -1.46% 8.77% 11.23% 11.62% 12.43% 8.61% 9.50% 5.00% - Public corporations -11.33% 4.00% 3.52% -13.98% -9.95% -0.77% 1.25% 1.33% 1.73% -2.12% -7.49% 6.25% 17.42% -5.72% -1.19% 9.05% 11.49% 11.86% 12.66% 8.82% - Private Business Enterprises TOTAL INV IN CONSTR -4.56% 5.25% 3.38% -9.68% 7.94% 19.07% 21.66% 21.99% 22.76% 18.47% TOTAL INV IN BLDNG AND CONSTR -3.55% -4.41% 0.77% -4.11% 0.79% 3.64% 1.45% 5.08% 7.46% 6.20% -4.56% 5.25% 3.38% -9.68% -5.19% 4.79% 7.29% 7.79% 8.69% 5.09% TOTAL GFCF CONSTRUCTION 2.87% 6.21% 4.68% -4.45% 0.99% 4.33% 1.54% 4.38% 8.23% 7.01% TOTAL GFCF BLDNG AND CONSTR Source: BMI-BRSCU INVESTMENT IN BUILDING & CONSTRUCTION: 2013-2020: LMR SOYUZ SCENARIO SECTOR AND SEGMENT 2013-2020 Average R*Million 23 623 117 565 61 128 4 523 56 100 R*Million 2 953 14 696 7 641 565 7 012 % 1.53% 7.60% 3.95% 0.29% 3.62% % 0.84% 4.17% 2.17% 0.16% 1.99% 201 072 87 809 395 55 465 607 680 25 134 10 976 49 6 933 75 960 12.99% 5.67% 0.03% 3.58% 39.26% 7.13% 3.11% 0.01% 1.97% 21.53% 25 115 35 950 32 673 9 042 46 733 3 139 4 494 4 084 1 130 5 842 1.62% 2.32% 2.11% 0.58% 3.02% 0.89% 1.27% 1.16% 0.32% 1.66% 157 348 37 734 238 079 582 672 316 199 41 204 1 547 755 19 668 4 717 29 760 72 834 39 525 5 151 193 469 10.17% 2.44% 5.58% 1.34% 37.65% 20.43% 2.66% 100.00% 20.65% 11.21% 1.46% 54.85% CONSTRUCTION General government 576 627 72 078 45.26% 20.43% Public corporations 462 205 57 776 36.28% 16.38% Private business enterprises 235 298 29 412 1 274 130 2 821 885 159 266 352 736 1 058 207 1 763 678 3 527 356 18.47% 100.00% 8.34% 45.15% 100.00% PRIVATE RESIDENTIAL Dwelling-houses < 80 m2 Dwelling-houses > 80 m2 Townhouses & Flats Other (Incl. hotels & casinos) Additions & alterations PUBLIC RESIDENTIAL Affordable Housing General Government Public authorities. Private Business Enterprises TOTAL RESIDENTIAL PRIVATE NON-RESIDENTIAL Offices Shops Industrial & warehouse Other Additions & Alterations PUBLIC NON-RESIDENTIAL General Government Public Corporations Private Business Enterprises TOTAL NON RESIDENTIAL Unrecorded Res Add's and Alt's Unrecorded Non Res Add's and Alt's GRAND TOTAL TOTAL CONSTRUCTION TOTAL BLDNG AND CONSTR 3 years (2013-2015) 5 years (2013-2017) 8 years (2013-2020) ©BMI-BRSCU
    • The impact of the growth scenarios of the Investment in Building and Construction on Building Material Sales can be seen in the following graphic. The Market for Building Materials: 2002-2012 Lower Middle and High Road Scenarios: 2013-2020 (R Million) (Constant 2012 Values) (Source: MFA; StatsSA; SARB; BMI-BRSCU Workings) 227 904 203 485 178 496 173 297 154 729 121 280 120 490 84 308 96 613 112 646 122 103 131 176 134 227 121 280 120 490 104 446 107 031 109 114 114 428 116 577 112 178 115 958 122 800 130 567 136 929 134 227 76 293 76 293 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 104 446 112 646 96 613 84 308 100 000 122 103 150 000 120 113 131 176 75 572 75 572 R MILLIONS (CONSTANT 2012 VALUES) 250 000 200 000 250 694 300 000 50 000 0 Building Materials (Lower Middle Road Scenario) 75 572 76 293 84 308 96 613 112 646 122 103 131 176 134 227 121 280 120 490 104 446 107 031 109 114 114 428 116 577 112 178 115 958 122 800 130 567 Building Materials (High Road Scenario) 75 572 76 293 84 308 96 613 112 646 122 103 131 176 134 227 121 280 120 490 104 446 120 113 136 929 154 729 173 297 178 496 203 485 227 904 250 694 The Sense-making Update analyses the StatsSA data of Building Plans Passed (BPP) and Buildings Completed (BC) and this provides us with an important feel for the trends in the Building Industry. The Industry Dashboard takes a more systemic view including Mortgage Advances, Gross Fixed Capital Formation (GFCF) and Cement and Lumber sales. It therefore provides us with an overall view of the Building and Construction Industry as well as Building Material Sales. All the Power-point presentations and the XCell spreadsheets of the Industry Dashboard are posted on the website. Dr. Llewellyn B Lewis, Principal Consultant, BMI Building Research Strategy Consulting Unit cc, 9 Adrienne Street, Strathavon, Sandton, PO Box 784133, Sandton 2146. research@bmi-brscu.co.za www.strategicforum.co.za Tel: (011) 884 2075 Cell 082 884 0063 Fax 086 6472 494 January 2014