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Sensemaking update Dec 2011

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In this regular monthly update we analyse Building Plans Passed (BPP) and Buildings Completed (BC) from every possible angle and make a MAT (Moving Annual Total) forecast for the year under analysis. …

In this regular monthly update we analyse Building Plans Passed (BPP) and Buildings Completed (BC) from every possible angle and make a MAT (Moving Annual Total) forecast for the year under analysis. For a nominal fee you can subscribe for a full year or buy a single report.

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  • 1. Studium Ad Prosperandum BUILDING RESEARCH BUILDING RESEARCH •• BMI BMI STRATEGY CONSULTING STRATEGY CONSULTING UNIT cc UNIT ccVoluntas in Conveniendum Reg. No. 2002/105109/23SENSEMAKING UPDATE: DECEMBER 2011: ANALYSIS OF BPP AND BC (YTD OCT 2011)Trend in monthly activity: Cum YTD October 2011 vs 2010: Building Plans Passed (BPP)and Buildings Completed (BC) by Sector: m2In this Sense making Update we again look at the change in m2 rather than CurrentValues. This is because physical volume of production in materials and building,relates to m2 because it is derived from the m2 built. It is also in constant termsand gives a better trend comparison than Current Value because inflation is notincluded.The value of recorded CUM YTD building plans passed (BPP) by larger municipalities(in m2) for October 2011 decreased by – 2,25% (- 264 685 m2 ) compared with CUMYTD October 2010.The largest decrease in CUM YTD BPP was reported for Additions and AlterationsBPP (-16,07% or – 670 138 m2), whilst CUM YTD BPP for Residential Buildingsincreased by = 2,60% (or + 134 410 m2). Cumulative YTD % Change in BPP by Sector: Jan - Oct 2011 vs 2010: M2*1000 (Source: StasSA, BMI-BRSCU Workings) 142% 122% 102% Percentage 82% 62% 42% 22% 2% -18% Jan Feb March April May June July Aug Sept Oct Nov Dec Residential building -3.42% -4.40% 18.08% 11.15% 4.69% 7.32% 6.96% 5.73% 3.96% 2.60% Non-residential buildings 139.69% 28.68% -1.60% -11.07% -3.06% -7.53% -5.38% -5.16% 2.48% 11.19% Additions and alterations 11.66% -8.81% -4.28% -5.87% -6.93% -7.08% -10.68% -10.16% -15.02% -16.07% Total 25.71% 0.95% 5.67% 0.18% -0.95% -0.86% -1.74% -1.97% -3.00% -2.25%The increase in CUM YTD reported for non residential buildings BPP was + 11,19% or+ 271 043 m2. Longer term trends in the non-residential sector still reflect falling demandlevels. BMI-BRSCU Sense making Update: December 2011 Page 1
  • 2. Cumulative YTD Change in BPP by Sector: Jan - Oct 2011 vs 2010: M2*1000 (Source: StasSA, BMI-BRSCU Workings) 400 000 200 000 0 M2*1000 -200 000 -400 000 -600 000 -800 000 Jan Feb March April May June July Aug Sept Oct Nov Dec Residential building -12 125 -36 489 230 542 193 110 110 435 213 696 241 971 233 451 183 567 134 410 Non Residential building 167 860 113 378 -11 227 -103 178 -35 864 -114 931 -93 898 -101 431 54 187 271 043 Additions and alterations 27 887 -58 817 -46 063 -82 666 -125 149 -155 758 -285 076 -311 492 -553 353 -670 138 Total 183 622 18 072 173 252 7 266 -50 578 -56 993 -137 003 -179 472 -315 599 -264 685The trend in CUM YTD Additions and Alterations is fluctuating in 2011 but generallydownward. Cumulative YTD % Change in BC by Sector: Jan - Oct 2011 vs 2010: M2*1000 (Source: StasSA, BMI-BRSCU Workings) 30% 20% 10% Percentage 0% -10% -20% -30% -40% Jan Feb March April May June July Aug Sept Oct Nov Dec Residential building -19.03% -12.54% -1.53% -2.70% -9.99% -5.66% -5.76% -7.01% -2.88% -1.85% Non-residential buildings -34.35% -15.71% -22.65% -16.86% -19.87% -15.01% -21.35% -22.70% -21.39% -22.41% Additions and alterations 1.84% 9.53% 21.79% 9.53% 2.42% 5.86% -3.98% -6.61% -5.44% -5.12% Total -17.93% -7.58% -1.42% -3.25% -9.44% -5.12% -9.29% -10.79% -8.08% -7.92%The value of buildings reported as completed (BC) to larger municipalities (in m2) forCUM YTD October 2011 decreased by – 7,92% (- 664 528 m2) compared with CUMYTD October 2010. BMI-BRSCU Sense making Update: December 2011 Page 2
  • 3. The biggest percentage decrease in the CUM YTD value of buildings reported ascompleted (BC) was reported for Non residential building (- 22,41% or – 476 915 m2).CUM YTD Residential buildings decreased (- 1,85% or – 75 522 m2) while CUM YTDadditions and alterations decreased (- 5,12% or – 112 091 m2). Cumulative YTD Change in BC by Sector: Jan - Oct 2011 vs 2010: M2*1000 (Source: StasSA, BMI-BRSCU Workings) 150 000 100 000 50 000 0 -50 000 -100 000 -150 000 -200 000 M2*1000 -250 000 -300 000 -350 000 -400 000 -450 000 -500 000 -550 000 -600 000 -650 000 -700 000 -750 000 Jan Feb March April May June July Aug Sept Oct Nov Dec Residential building -58 070 -88 449 -16 873 -39 939 -202 759 -136 801 -164 383 -230 632 -105 570 -75 522 Non-residential buildings -59 733 -50 929 -137 682 -133 678 -208 325 -182 615 -324 591 -381 601 -391 554 -476 915 Additions and alterations 2 971 34 137 122 191 74 494 24 576 71 214 -61 572 -118 946 -108 489 -112 091 Total -114 832 -105 241 -32 364 -99 123 -386 508 -248 202 -550 546 -731 179 -605 613 -664 528Note that Additions and Alterations (Residential and Non Residential) are reportedseparately as a sector in the above comparison (based on StatsSA data by Sector). RESIDENTIAL TOTAL (INCL A&A): BC: CUM ACTUAL 2011 VS 2010 BY MONTH: TOTAL RSA (OCT 2011) (Source: StatsSA, BMI-BRSCU Workings) 8 000 000 4% MAT FORECASTPercentage Difference: Cum Actual 2011 vs 2010 3% 7 000 000 2% 1% 0% 6 000 000 -1% -2% 5 000 000 -3% Square Metres (m2) -4% 4 000 000 -5% -6% 3 000 000 -7% -8% -9% 2 000 000 -10% -11% 1 000 000 -12% -13% 0 -14% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Res Total: Cum Actual 2011: m2 379 294 904 887 1 582 137 2 059 999 2 583 797 3 202 733 3 764 959 4 279 430 4 929 589 5 511 423 6 153 821 6 698 719 Res Total: Cum Actual 2010: m2 439 395 995 750 1 534 710 2 063 796 2 792 626 3 325 524 3 968 535 4 573 775 5 092 254 5 632 924 6 275 322 6 820 220 Res Total: Cum Actual 2011 vs 2010: % -13.68% -9.13% 3.09% -0.18% -7.48% -3.69% -5.13% -6.44% -3.19% -2.16% -1.94% -1.78%The next analysis shows the Cumulative YTD actual for Residential Total BC as atOctober 2011 vs 2010 (including Additions & Alterations) as well as the MAT Forecastfor 2011.The difference in Cumulative YTD October Residential BC for 2011 vs 2010 is evidentfrom the analysis (- 2,16%). BMI-BRSCU Sense making Update: December 2011 Page 3
  • 4. The MAT Forecast for Res Total BPP at this stage indicates that 2011 could end – 1,78%below 2010.In the case of Non Residential Total BC (including Additions and Alterations) thedifference between the Cumulative YTD Actual for September 2011 vs 2010 is well belowthe cumulative actual for the same period in 2010. In this case – 12,42% as at endOctober. NON RES TOTAL (INCL A&A): BC: CUM ACTUAL 2011 VERSUS 2010 BY MONTH: TOTAL RSA (OCT 2011) (Source: StatsSA, BMI-BRSCU Workings) 3 400 000 0% 3 200 000 MAT FORECAST 3 000 000 -5% Percentage Difference: Cum Actual 2011 vs 2010 2 800 000 2 600 000 2 400 000 -10% 2 200 000 2 000 000 Square Metres (m2) 1 800 000 -15% 1 600 000 1 400 000 1 200 000 -20% 1 000 000 800 000 600 000 -25% 400 000 200 000 0 -30% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec NR Total: Cum Actual 2011: m2 146 339 377 453 657 760 893 943 1 123 484 1 400 138 1 607 932 1 762 745 1 957 877 2 214 607 2 464 375 2 667 406 NR Total: Cum Actual 2010: m2 201 070 391 831 737 551 989 269 1 301 163 1 525 549 1 954 902 2 199 579 2 400 825 2 757 634 3 007 402 3 210 433 NR Total: Cum Actual 2011 vs 2010: % -27.22% -3.67% -10.82% -9.64% -13.66% -8.22% -17.75% -19.86% -18.45% -19.69% -18.06% -16.91%The percentage deviation shows a fluctuating trend, from -27,22% in January 2011, -3,67% in February, – 10,82% in March, – 9,64% in April, – 13,66% in May,– 8,22% inJune, – 17,75% in July, – 19.86% in August, -18,45% in September and – 19,69% inOctober which indicates a fluctuating Y/Y trend in the 2011 year.At this stage the MAT Forecast (in m2) indicates that Non Residential Total BCcould end the year at – 16,91% below 2010, which would be a fairly disappointingperformance under the conditions.The BC Total negative deviation (Total Residential and Non Residential, includingAdditions and Alterations) is – 8,11% as at the end of October. After these first 10months results it is our view that the decline in Residential Investment shoulddecrease marginally in CUM YTD month on month from now on and in spite of theexpected larger decline in Non Residential activity will contribute to a decrease ofabout -6,62% in Total Investment in Building for 2011 compared to 2010 (in m2).Nevertheless it still remains to be seen whether the decline from the levels achieved in2010 will be improved by the increasing willingness of the Banks to relax their stringentlending criteria so that Mortgage Advances can flow into the industry. BMI-BRSCU Sense making Update: December 2011 Page 4
  • 5. The analysis Segment by Segment indicates that the lower turning point has beenreached in all the segments of the Residential BC market but not in the Non Residentialsector. RES & NON RES TOTAL (INCL A&A): BC: CUM ACTUAL 2011 VERSUS 2010 BY MONTH: TOTAL RSA (OCT 2011) (Source: StatsSA, BMI-BRSCU Workings) 11 000 000 0% MAT FORECAST -1% 10 000 000 -2% Percentage Difference: Cum Actual 2011 vs 2010 9 000 000 -3% -4% 8 000 000 -5% Square Metres (m2) -6% 7 000 000 -7% 6 000 000 -8% -9% 5 000 000 -10% -11% 4 000 000 -12% 3 000 000 -13% -14% 2 000 000 -15% -16% 1 000 000 -17% 0 -18% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Res & NR Total: Cum Actual 2011: m2 525 633 1 282 340 2 239 897 2 953 942 3 707 281 4 602 871 5 372 891 6 042 175 6 887 466 7 726 030 8 618 196 9 366 125 Res & NR Total: Cum Actual 2010: m2 640 465 1 387 581 2 272 261 3 053 065 4 093 789 4 851 073 5 923 437 6 773 354 7 493 079 8 390 558 9 282 724 10 030 653 Res & NR Total: Cum Actual 2011 vs 2010 (%) -17.93% -7.58% -1.42% -3.25% -9.44% -5.12% -9.29% -10.79% -8.08% -7.92% -7.16% -6.62%The trend in the CUM YTD deviation in Total (Private Sector) BC is evident from theanalysis. Currently it is – 7,92% below 2010 and the MAT Forecast indicates a negativedeviation of – 6,62% by end 2011. Our view is that the Residential activity (68% of totalPrivate Sector Building Activity) will improve and end up marginally negative by the end ofthe year.However the Non Residential activity (32% of Total Private Sector Building Activity) willcontinue declining and will end up in negative territory and consequently will have anegative impact on Total Private Sector Building Activity which should enter positivegrowth by the second to third quarter of 2012. Later in this report the detailed view ofoverall activity in 2011 can be seen, based on the available data at present.The decrease in Cum YTD September 2011 of – 7,92% for the first 10 months of2011 will have to be added to in the ensuing months of 2011 (and simultaneouslymatching or exceeding the monthly actual for 2010) to end up equal to or above 2010.This is probably not possible and our view at this stage is that Total BC m2 for2011 will end up some 6,62% below the 2010 level.The improvement would have to take place across all the major segments of both theResidential and Non Residential Sectors as the analysis shows.The “snapshot” as at October 2011 (overleaf) shows the % difference in cumulative Y/YActual BC for 2011 vs 2010. It shows that the segments Dwellings < 80 m2, Dwellings >80 m2 (in number and value only), Total Res (in value), Other Non Res, Additions &Alterations (Res) and Additions & Alterations (Total) are in positive territory, whilst Flatsand Townhouses, Res Other, Offices and Banking, Industrial and Warehousing and NonRes Total, Res Additions & Alterations (in m2), Non Res Additions aand Alterations andGrand Total are in negative territory. BMI-BRSCU Sense making Update: December 2011 Page 5
  • 6. % Difference in Cumulative Y/Y BC: Cum Actual Oct 2011 vs 2010 by Segment: Total RSA (Source: StatsSA, BMI-BRSCU Workings) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% R000 R000 R000 R000 R000 R000 R000 R000 R000 R000 R000 R000 R000 R000 No m2 No m2 No m2 m2 m2 m2 m2 m2 m2 m2 Dwellings < Dwellings > Flats and TH Other Total Office & Shopping Ind&WH Other Total A&A A&A Other Total A&A 80m2 80m2 Banking Dwellings TotalTrend in monthly activity: 1994 – 2011 (October): Building Plans Passed (BPP) andBuildings Completed (BC) BPP & BC Total Residential (Including A&A): 1993-2011 by month: m2 (Oct) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL RES BC & BPP M2) 1 700 000 1 600 000 1 500 000 1 400 000 1 300 000 1 200 000 Square Metres 1 100 000 1 000 000 900 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 BC TOTAL RESIDENTIAL: M2 BPP TOTAL RESIDENTIAL: M2 12 per. Mov. Avg. (BC TOTAL RESIDENTIAL: M2) 12 per. Mov. Avg. (BPP TOTAL RESIDENTIAL: M2)The latest (Oct) data for Total Residential BPP seems to confirm that the DOWNWARDtrend in monthly BPP activity has TURNED and is gradually IMPROVING, but still closeto BC. This does indicate that Residential BPP has turned and if the trend continues itdoes bode better for the medium-term outlook for BC in the Residential Building sector. BMI-BRSCU Sense making Update: December 2011 Page 6
  • 7. The 12 month moving average trend in monthly Residential BPP in M2 illustrates theIMPROVING trend which must eventually put positive pressure on BC (because thedecline in BPP has been arrested).The trend in Non Residential BPP moved upward under the influence of the BPP forthree large Shopping Centres in KZN and Mpumalanga during January 2011.However Non Res BC will probably continue its declining trend in 2011 and recoverduring mid to end 2012. The 12 month moving average trend for Total BPP and BCshows the pattern. The pressure from the decline in BPP is evident in the trend in BC.We are hopeful that the BC will decline at a decreasing rate in 2011 with the ResidentialSector recovering gradually but with the Non Residential Sector continuing its decliningtrend. BPP & BC Total Non Residential (Including A&A): 1993-2011 by month: m2 (Oct) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL NR BC&BPP M2) 600 000 500 000 Square Metres 400 000 300 000 200 000 100 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 BC TOTAL NON RESIDENTIAL: M2 BPP TOTAL NON RESIDENTIAL: M2 12 per. Mov. Avg. (BC TOTAL NON RESIDENTIAL: M2) 12 per. Mov. Avg. (BPP TOTAL NON RESIDENTIAL: M2)The BPP for Total Building therefore also exhibits the steep decline since about July 2007but with signs of slow recovery. BC for Total Building held up quite well initially but startedto follow the decline in BPP since mid 2009.The question remains whether the recovery in BPP will be timeous and of sufficientstrength to arrest the decline of BC. Our view is that the recovery in BC will onlycommence in the third to fourth quarters of 2011.It can be seen from the foregoing paragraphs that the Non Residential Sector lags theResidential sector. Analysis confirms that the Building Plans Passed (BPP) in NonResidential Sector lags that of Residential by some 12 months.Somewhat counter intuitively this is not the case for the recent trend in BuildingsCompleted (BC) where the two series now seem to be moving together. BMI-BRSCU Sense making Update: December 2011 Page 7
  • 8. BPP & BC Total Building (Including A&A): 1993-2011 by month: m2 (Oct) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL BLDNG BC&BPP M2) 2 200 000 2 100 000 2 000 000 1 900 000 1 800 000 1 700 000 Square Metres 1 600 000 1 500 000 1 400 000 1 300 000 1 200 000 1 100 000 1 000 000 900 000 800 000 700 000 600 000 500 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 BC TOTAL BUILDING: M2 BPP TOTAL BUILDING: M2 12 per. Mov. Avg. (BC TOTAL BUILDING: M2) 12 per. Mov. Avg. (BPP TOTAL BUILDING: M2)Therefore it is expected that the Residential Sector will bottom out and continue a slowgrowth recovery in 2012 while the Non Residential Sector will continue declining for afurther period of some 12-18 months beyond Residential.Cumulative YTD Building Plans Passed (BPP) by Segment: YTD Oct 2011 vs 2010.Examination of the Excell Spreadsheets shows that the STEEP DECLINE in BuildingPlans Passed (BPP) in m2 appears to have been arrested (although somewhattentatively). RES BUILDING PLANS PASSED (BPP) BY SEGMENT: TOTAL RSA: CUM* 2011 VS 2010 (OCT) (Source: StatsSA, BMI-BRSCU Workings) -65% -55% -45% -35% -25% -15% -5% 5% 15% 25% 35% Dwelling-house < 80 square metres Dwelling-house => 80 square metres Flats and townhouses Other buildings Adds and alts TOTAL RES Dwelling-house => 80 square Dwelling-house < 80 square TOTAL RES Adds and alts Other buildings Flats and townhouses metres metres m2 -1.69% -9.32% -55.37% 19.26% -1.88% 12.86% R*1000 2.63% -3.44% -63.88% 17.68% 4.39% 25.80% Numbers 20.83% 2.34% 4.33%The decline in Residential BPP has been arrested (with Other Buildings the worstperformer followed by Additions and Alterations). The Cumulative Oct YTD TotalResidential BPP recorded an decrease of – 1,69% in m2 and of + 2,63% in current value. BMI-BRSCU Sense making Update: December 2011 Page 8
  • 9. NON RES AND TOTAL BPP BY SEGMENT: TOTAL RSA: CUM* 2011 VS 2010 (OCT) (Source: StatsSA, BMI-BRSCU Workings) -32% -28% -24% -20% -16% -12% -8% -4% 0% 4% 8% 12% 16% 20% Office and banking Shopping Industrial and warehouse Other buildings Additions and alterations TOTAL NON RESIDENTIAL GRAND TOTAL RES AND NON RES GRAND TOTAL RES AND TOTAL NON Additions and Industrial and Other buildings Shopping Office and banking NON RES RESIDENTIAL alterations warehouse m2 -2.25% -3.49% -31.48% 18.10% 8.16% 13.68% 10.98% R*1000 2.55% 2.41% -28.37% 44.40% 15.34% 18.88% 23.27%The Cumulative December 2010 vs 2009 for Non Residential BPP showed aDECLINE of -28,12% (-29,10% by end November) in m2 and -22,44% (-23,33% by endNovember) in Current Rand value.The Cumulative Oct 2011 of Total Non Residential showed an decrease of – 3,49% inm2 and an increase of + 2,41% in value.This seems to confirm that the decline in Non Residential BPP has been arrested(moderated by the increase in Shopping in January). Nevertheless it must beremembered that Private Non Residential activity is only about 30% of Total BuildingActivity.The Cumulative December 2010 vs 2009 for Total Residential and Non ResidentialBPP showed a DECREASE of -12,4% (-12,64% by end November) in m2 and -4,74% (-4,79% by end November) in Current Rand Value (a tentative recovery).The Cumulative Oct 2011 of Total Residential and Non Residential BPP showed adecrease of – 2,25% in m2 and + 2,55% in value seemingly confirming the recovery.Cumulative YTD Buildings Completed (BC) by Segment: YTD Oct 2011 vs 2010.Examination of the Excell Spreadsheets shows that Buildings Completed (BC) is still onthe way down but at a moderating pace. Cumulative December 2010 vs 2009 forResidential BC showed a DECLINE of -26,76% (-27,2% by end November) in m2 and -18,6% (-19,16% by end November) in Current Rand value.The worst performing sectors were Flats and Townhouses (decline of -40,35% innumbers) and Dwelling Houses < 80 m2 (decline of -27,19% in numbers).Cumulative YTD Oct 2011 vs 2010 for Residential BC showed a DECREASE of –2,16% in m2 and an INCREASE of + 3,49% in Current Rand value. The worst performingsectors were Other Buildings followed by Flats and Townhouses (decline of – 8,41% innumbers) and Dwelling Houses > 80 m2 recorded an increase of + 5,72% in numbers). BMI-BRSCU Sense making Update: December 2011 Page 9
  • 10. TOTAL RES BUILDINGS COMPLETED (BC) BY SEGMENT: CUM* 2011 VS 2010: TOTAL RSA (OCT) (Source: StatsSA, BMI-BRSCU Workings) -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% Dwelling-house < 80 square metres Dwelling-house => 80 square metres Flats and townhouses Other buildings Adds and alts TOTAL RES Dwelling-house => 80 Dwelling-house < 80 TOTAL RES Adds and alts Other buildings Flats and townhouses square metres square metres m2 -2.16% -2.95% -27.94% -13.04% 0.09% 14.02% R*1000 3.49% -5.73% -29.69% -11.16% 8.57% 27.67% Number -8.41% 5.72% 8.40%The Cumulative December 2010 vs 2009 for Non Residential BC showed a DECLINEof -31,60% (-28,08% by end November) in m2 and -24,66% (-18,45% by end November)in Current Rand value. This confirms that THE TREND in Non Residential BC is likely tocontinue its negative path in the coming months.The Cumulative December 2010 vs 2009 for Total Residential and Non ResidentialBuildings Completed showed a DECREASE of -28,38% (-27,49% by end November) inm2 and a DECREASE of -20,83% (-18,91% by end November) in Current Rand Value.This again gives a warning that the decline in BC could continue well into 2011.The Cumulative Oct 2011 vs 2010 for Non Residential BC showed a DECLINE of -19,69% in m2 and – 12,42% in Current Rand value. This confirms that THE TREND inNon Residential BC is likely to continue its negative path in the coming months. NON RESIDENTIAL AND TOTAL BUILDINGS COMPLETED (BC): CUM* 2011 VS 2010: TOTAL RSA (OCT) (Source: StatsSA, BMI-BRSCU Workings) -40% -36% -32% -28% -24% -20% -16% -12% -8% -4% 0% 4% 8% Office and banking Shopping Industrial and warehouse Other buildings Additions and alterations TOTAL NON RESIDENTIAL GRAND TOTAL RES AND NON RES GRAND TOTAL RES TOTAL NON Additions and Industrial and Other buildings Shopping Office and banking AND NON RES RESIDENTIAL alterations warehouse m2 -7.92% -19.69% -10.50% 17.29% -35.98% -9.91% -25.98% R*1000 -2.20% -12.42% -5.73% 48.98% -28.96% -5.71% -24.17% BMI-BRSCU Sense making Update: December 2011 Page 10
  • 11. The Cumulative Oct 2011 vs 2010 for Total Residential and Non ResidentialBuildings Completed showed a DECREASE of -7,92% in m2 and a DECREASE of –2,20% in Current Rand Value. This again gives a signal that the decline in BC could bearrested with growth commencing gradually from THE FOURTH QUARTER 2011.Cumulative YTD Percentage Change of Building Plans Passed (BPP) & BuildingsCompleted (BC) by Month and Sector: January 1994 - Oct 2011 Cumulative Y/Y Percentage Change: BPP & BC: Total Residential (Incl A&A): 1993-2011: m2 (Oct) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: % CUM BC BY SEGM & MNTH: Chart 8) 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 % CUM BC BY SEGM& MNTH % CUM BPP BY SEGM& MNTH 12 per. Mov. Avg. (% CUM BC BY SEGM& MNTH) 12 per. Mov. Avg. (% CUM BPP BY SEGM& MNTH)The Cumulative Year on Year percentage change for BPP and BC for each of the Sectorsand in Total illustrates the relationship between the two series with BPP leading BC bysome 9 – 12 months. Thus the declining trend in BPP must inevitably be followed by adecline in BC.The analysis confirms that Residential BPP (in m2) has turned around from a cumulativeYTD decline of approximately -40% by end 2009 and has reached the zero growth line inAugust 2011 (about 8 months). It seems to have leveled off but could recover and reach+10% by year end and pull BC up accordingly.The series BC (in m2) has turned at the -30% negative growth line and if history isanything to go by it can be expected that the trend-line for BC could reach zero Y/Ycumulative growth by first quarter 2012.The 12 month moving average series for Non Residential BPP (m2) entered thenegative zone early in 2009 and turned sharply upward from about -35% under theinfluence of the BPP of two major Shopping Centres in Kwazulu Natal and Mpumulanga. BMI-BRSCU Sense making Update: December 2011 Page 11
  • 12. Cumulative Y/Y Percentage Change: BPP & BC: Total Non Residential (Incl A&A): 1993-2011: m2 (Oct) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: % CUM BC BY SEGM & MNTH: Chart 14) 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 % CUM BC BY SEGM& MNTH % CUM BPP BY SEGM& MNTH 12 per. Mov. Avg. (% CUM BC BY SEGM& MNTH) 12 per. Mov. Avg. (% CUM BPP BY SEGM& MNTH)The BC trendline headed downward quite strongly, recovered temporarily in early 2009and breached the zero growth line and has followed the BPP trend down to the -30%growth line and has now turned around (less negative).As far as Total BPP and BC m2 are concerned, the 12 month moving average trend linefor BPP has turned at the -30% level, whilst the BC trend line has also turned at the -30%line and is showing reasonably strong upward tendency. Cumulative Y/Y Percentage Change: BPP and BC: Total Building (Inc A&A): 1993-2011: m2 (Oct) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: % CUM BC BY SEGM & MNTH: Chart 15) 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 % CUM BC BY SEGM& MNTH % CUM BPP BY SEGM& MNTH 12 per. Mov. Avg. (% CUM BC BY SEGM& MNTH) 12 per. Mov. Avg. (% CUM BPP BY SEGM& MNTH)When considering the trend of BPP it is likely that the BC will follow the trend of BPP. ITIS EVIDENT THAT THE BC M2 ENDED UP IN 2010 AT SOME 30% BELOW 2009.THE LONG AWAITED RECOVERY FROM THE 2010 LEVEL COULD COMMENCE BYTHE FIRST TO SECOND QUARTER OF 2012. BMI-BRSCU Sense making Update: December 2011 Page 12
  • 13. It is common knowledge that the series BPP represents Building Activity in the Pipeline.Of course it is known that not all BPP get built (converted into BC).Some plans are cancelled or postponed to be reactivated later at a more opportune time.There is no information available about the so-called inventory of BPP in the pipeline andthe data can only be accepted as it is presented.We have therefore developed the series Net Building in the Pipeline (NBIP = BPP-BC) to inform our understanding of the “inventory” of still to be built BPP in thepipeline.Net Building Activity in the Pipeline (NBIP = BPP-BC) Total Residential: 1993-2011: BC, Net Building in the Pipeline (NBIP): by month: 1993-2010: m2 (Oct) (Source: StatsSA, BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: NBIP (BPP-BC): Chart 17) 1 000 000 900 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total Residential NBIP Total Residential BC 12 per. Mov. Avg. (Total Residential NBIP) 2011 12 per. Mov. Avg. (Total Residential BC)We have observed the trend lines in BPP of many segments crossing below BC thusraising the obvious concern of the sustainability of BC. It is evident that information aboutthe volume in the pipeline (net BPP) would be useful to inform a view of future BuildingActivity (BC) and to this end we have developed the series, i.e. Net Building in thePipeline (NBIP = BPP – BC).It can be seen that the BC tracked NBIP from 1993 to about 2006 when a TRENDBREAK took place with the deviation dropping dramatically It has recovered frommid 2009 but it will have to start tracking BC CLOSER ONCE AGAIN FORSUSTAINABLE PERFORMANCE. BMI-BRSCU Sense making Update: December 2011 Page 13
  • 14. Total Non Residential: 1993-2011: BC, Net Building in the Pipeline (NBIP): by Month: m2 (Oct) (Source: StatsSA, BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: NBIP (BPP-BC): Chart 22(3)) 500 000 450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 NBIP Total Non Residential BC Total Non Residential 12 per. Mov. Avg. (NBIP Total Non Residential) 12 per. Mov. Avg. (BC Total Non Residential) Total Building: BC: 1993-2011: Net Building in the Pipeline (NBIP): by Month: m2 (Oct) (Source: StatsSA, BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: NBIP (BPP-BC): Chart 16) 1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Building NBIP (BPP-BC) Total Building BC 12 per. Mov. Avg. (Total Building NBIP (BPP-BC)) 12 per. Mov. Avg. (Total Building BC)We propose that the IDEAL NBIP (INBIP) should be AT LEAST equal to the level ofBC – but preferably, say 1,5*BC. It is evident that this level was more or lessachieved historically from 1993 with the BC trend-line fairly closely correlated withthe NBIP trend-line – at least up to the end of 2006 when THE TREND BREAKoccurred. Following the decline in Mortgage Advances it is hardly surprising that theshort-term outlook for BC in both the Total Residential and Non Residential Sectors areproblematic as the gap between NBIP (Net Building in the Pipeline) and BC clearlyillustrate. It is inevitable that the trend in BC must follow the COMPELLING downwardtrend in BPP. BMI-BRSCU Sense making Update: December 2011 Page 14
  • 15. Total Building: BC: 1993-2011: Net Building in the Pipeline (NBIP) & IDEAL (NBIP): by Month: M2 (Oct) (Source: StatsSA, BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: NBIP (BPP-BC): Chart 16(2)) 2 000 000 1 800 000 1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Building NBIP (BPP-BC) Total Building BC Total Building INDIP (1.5*BC) 12 per. Mov. Avg. (Total Building NBIP (BPP-BC)) 12 per. Mov. Avg. (Total Building BC) 12 per. Mov. Avg. (Total Building INDIP (1.5*BC))There is evidence that the Banks are gradually relaxing their stringent loan criteria andthis is evident in the NBIP trend-line.Although the NBIP trend appears to have reversed since late 2009 it is evident that itcould take quite a while for the gap between NBIP and BC to close and return to thehistoric pattern. It is consequently concluded that the SUSTAINABILITY OF SHORT-TERM BC ACTIVITY IS PROBLEMATIC IN BOTH THE RESIDENTIAL AND NONRESIDENTIAL SECTORS. The analysis of Total BC activity confirms this.Outlook for Building and Construction Activity by Sector and Segment: 2011 (Current2010 Value)At this stage the numbers for Buildings Completed (BC) for Oct 2011 is available, as wellas the Q2 data for Gross Fixed Capital Formation (GFCF) for Residential, NonResidential and Construction which became available from the SARB in August 2011.The second quarter numbers for 2011 is therefore available and we base our REVISEDforecast for 2011 on these numbers.The following table provides a detailed outlook for the Building and Construction Industryby Sector and Segment for 2011. The next table summarises the Y/Y growth outlook bySector and Segment for 2011 to 2015. BMI-BRSCU Sense making Update: December 2011 Page 15
  • 16. SHORTTERM OUTLOOK FOR THE BUILDING & CONSTR INDUSTRY: 2011: R*MILLION (CURRENT VALUE) SARB & StatsSA 2009 BMI Est % Change SARB & StatsSA 2010 BMI Est % Change BMI Est Q2 REV % Change GFCFPRIVATE RESIDENTIAL GFCF* BC** (BPP+BC)/2*** 2009 2010 GFCF* BC** (BPP+BC)/2*** 2010 2011 2011 2011 2011 Q2 2011 Dwelling-houses < 80 m2 2 271 1 107 2 271 -19.19% 1 835 918 1 835 10.90% 2 035 2 224 21.17% Dwelling-houses > 80 m2 14 614 7 307 14 614 -15.67% 12 323 6 162 12 323 2.90% 12 680 13 186 7.00% Townhouses & Flats 8 499 4 250 8 499 -33.58% 5 646 2 823 5 646 -9.65% 5 101 5 145 -8.86% Other (Incl. hotels & casinos) 1 003 501 1 003 20.56% 1 209 604 1 209 -24.50% 913 921 -23.82% Additions & alterations 8 419 13 618 8 419 -12.20% 7 392 3 696 7 392 5.22% 7 778 7 740 4.70%TOTAL PRIVATE RESIDENTIAL 34 806 34 806 26 783 34 806 -18.39% 28 405 28 405 14 203 28 405 0.36% 28 507 29 216 2.85%PUBLIC RESIDENTIAL - Affordable Housing 13 222 41.74% 18 742 10.00% 20 616 19 210 2.50% Public authorities. 5 213 5 213 -21.39% 4 098 4 098 5.00% 4 303 2 869 -30.00% Public corporations 10 10 250.00% 35 35 10.00% 39 33 -5.00% Private Business Enterprises 5 620 5 620 104.19% 11 476 11 476 5.00% 12 049 7 623 -33.57%TOTAL PUBLIC RESIDENTIAL 24 065 42.74% 15 609 34 350 7.73% 37 007 29 735 -13.44%TOTAL RESIDENTIAL (Incl AH) 58 871 6.60% 44 014 62 756 4.39% 65 514 58 951 -6.06%TOTAL GFCF RES (Excludes AH) 45 649 44 014 44 014 44 898 39 741 -9.71% 39 741PRIVATE NON-RESIDENTIAL Offices 4 863 3 884 4 863 -25.50% 3 623 3 235 3 623 -25.00% 2 717 2 969 -18.05% Shops 5 725 6 114 5 725 -41.62% 3 342 3 400 3 342 -5.00% 3 175 3 168 -5.21% Industrial & warehouse 4 638 5 580 4 638 -20.52% 3 686 4 386 3 686 -3.00% 3 575 2 711 -26.46% Other 859 1 340 859 7.73% 926 1 216 926 -5.00% 879 1 297 40.10% Additions & Alterations 4 285 6 026 4 285 -9.79% 3 866 5 966 3 866 -20.00% 3 093 3 691 -4.53%TOTAL PRIVATE NON-RESIDENTIAL 20 371 20 371 22 944 20 371 -24.19% 15 443 15 443 18 202 15 443 -12.97% 13 440 13 835 -10.41%PUBLIC NON-RESIDENTIAL Public Authorities 15 239 15 239 55.00% 12 806 12 806 5.00% 13 446 12 113 -5.41% Public Corporations 4 344 4 344 25.83% 4 707 4 707 10.00% 5 178 4 452 -5.41% Private Business Enterprises 20 926 20 926 31 532 31 532 -15.00% 26 802 29 827 -5.41%TOTAL PUBLIC NON-RESIDENTIAL 40 509 40 509 21.07% 49 045 49 045 -7.38% 45 426 46 392 -5.41%TOTAL GFCF NON RESIDENTIAL 60 880 60 880 5.93% 64 488 64 488 -8.72% 58 866 60 228 -6.61% 60 228TOTAL GFCF RES AND NON RES 106 529 108 502 108 502 103 764 99 969 -7.86% 99 969 Unrecorded Res Additions and Alterations 24 090 1.47% 24 445 5.00% 25 668 24 445 4.70% Unrecorded Non Res Additions and Alterations 10 823 39.09% 15 054 -10.00% 13 549 15 054 -4.53%TOTAL UNRECORDED ADDS & ALTS 34 913 13.14% 39 500 -0.72% 39 216 39 500 0.00%TOTAL INVESTMENT IN BUILDING 154 664 7.81% 166 743 -1.89% 163 596 158 678 -4.84%BPP & BC as % of Total Investment in Building 35.67% 26.30% 25.64% 27.13%Private Sector as % of Total Investment in Building 58.25% 49.99% 49.61% 52.02%CONSTRUCTION Public Authorities 55 323 55 323 -0.31% 55 153 55 153 -10.00% 49 638 54 069 -1.97% Public Corporations 86 683 86 683 8.95% 94 442 94 442 -12.50% 82 637 92 586 -1.97% Private Business Enterprises 24 475 24 475 3.57% 25 349 25 349 -15.00% 21 547 24 851 -1.97%TOTAL INVESTMENT IN CONSTRUCTION 166 481 166 481 5.08% 174 944 174 944 -12.07% 153 821 171 506 -1.97% 171 506TOTAL INV IN BLDNG AND CONSTR 273 010 321 145 6.40% 283 446 341 687 -7.10% 317 418 330 184 -3.37%TOTAL GFCF CONSTRUCTION 166 481 166 481 174 944TOTAL GFCF BLDNG AND CONSTR 273 010 321 145 341 687* Res GFCF excludes Affordable Housing* Non Res GFCF includes Public Sector** Stats SA*** StatsSA and BMI-BRSCU WorkingsSource: BMI-BRSCUINVESTMENT IN BUILDING AND CONSTRUCTION: 2010-2015 (CONSTANT 2010 VALUES) (REVISED DEC 2011) Year on Year GrowthSector and Segment 2010 2011 2012 2013 2014 2015Total Private Residential -18.39% 2.85% 3.03% 6.01% 9.00% -2.99%Total Public Residential 42.74% -13.44% 2.53% 0.82% -2.45% 0.21%Total Residential 6.60% -6.06% 2.83% 3.96% 4.62% -1.85%Total Private Non-Residential -24.19% -10.41% -11.02% 2.99% 5.99% 14.99%Total Public Non-Residential 21.07% -5.41% 0.00% 12.26% 7.02% 2.31%Total Non Residential 5.93% -6.61% -8.01% 5.74% 7.02% 10.91%Total Unrecorded Additions & Alterations 13.14% 0.00% -10.57% -5.43% 10.77% 0.33%Total Investment In Building 7.81% -4.84% -0.04% 0.02% 0.07% 0.03%Total Investment In Construction 5.08% -1.97% -5.59% -8.88% 8.44% 7.19%Total Investment In Building and Construction 6.40% -3.37% -4.91% -2.80% 7.49% 4.91%It is important to note from the above Investment Table that Private Sector BCcomprises less than 30% of Total Investment in Building. Nevertheless it is theMOST IMPORTANT, CURRENT INFORMATION AVAILABLE on the development ofthe Industry and this is the reason why we spend a considerable amount of time toanalyse it exhaustively.The foregoing analysis used with other series developed by BMI-BRSCU provides a neatmethodology to develop an outlook for the BC in the industry. All the Excell Spreadsheetsare posted on our website. The analysis is fully comprehensive by Sector and bySegment. For your convenience WE HAVE INTRODUCED A QUICK LINK FACILITY. Goto the default page and look for the latest posts. The quick link facility will take you directlyto the appropriate web page, at which point you will be requested to enter your user nameand passwordDr. Llewellyn B Lewis,PRINCIPAL CONSULTANT,BMI-Building Research Strategy Consulting Unit cc,November 2011.Tel.: (011)884-2075; Cell: 082-884-0063e-mail: research@bmi-brscu.co.zawww.bmi-brscu.co.za, BMI-BRSCU Sense making Update: December 2011 Page 16

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