Building Sector Confidence Stabilizes in Q4 2024 with Gains for Contractors

The FNB/BER Building Confidence Index remained unchanged at 40 in Q4 2024, reflecting continued dissatisfaction among the majority (60%) of respondents with current business conditions.

However, beneath the surface, there were notable improvements in certain areas, particularly with main contractors, indicating a mixed outlook for the sector, says Siphamandla Mkhwanazi, Senior Economist at FNB.

Here are the Key Highlights of the Index he shared

Main Contractor Confidence Surges:

• Confidence among main contractors surged by 10 points, reaching 51 in Q4 2024, the highest level in over a decade.
• This increase was supported by a significant rise in activity, employment, and overall profitability, particularly in residential building which showed signs of recovery after a poor run in previous quarters.
• Despite the positive momentum, order books remained weak, and there were concerns over short-term prospects, with new demand being limited.

Challenges for Sub-Contractors and Architects

• Sub-contractor confidence dropped significantly, falling to 39 in Q4 2024, a sharp decline from 58 in the previous year. This decline was driven by the end of load-shedding, which had previously boosted demand for residential solar installations.
• Both architects and quantity surveyors saw slight dips in confidence, with their sentiment readings dropping to 42. Delays in municipal approvals and payment issues were cited as key factors weighing on their outlook.

Mixed Outlook for Building Materials & Hardware Retailers

• Building material manufacturers saw a slight improvement in sentiment, rising by 2 points to 18, though confidence remains low. The increase in production and reduction in production costs provided some relief.
• Hardware retailers experienced a more optimistic quarter, with business confidence dipping slightly to 50 in Q4 (from 57 in Q3). Despite this, sales volumes reached their highest level in three years, driven by improved consumer spending, bolstered by lower inflation, an interest rate cut in September, and pension withdrawals from the Two-Pot Retirement System.

Sector Trends

• Non-residential building activity continued to show gradual improvement, though it remains off historical lows, with order books staying weak.
• Residential building activity has partially recovered, and main contractors have been more optimistic about the sector's performance.

The FNB/BER Building Confidence Index held steady at 40 in Q4 2024, masking the broader improvements in the contractor segment. While main contractors are experiencing growth in activity and profitability, ongoing challenges, such as weak demand, slow municipal approvals, and the ongoing impact of the construction mafia, could limit further sector expansion. The outlook remains cautious, with some optimism tempered by uncertainty over future growth.