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Building Costs Rocket By 19%

17 October 2006

Pretoria - Building costs in South Africa are rocketing, according to anew report released yesterday by Industry Insight, a construction industry market intelligence firm.  

Avenge building costs had increased by 19.1 percent year on year during the third quarter of this year compared with an annual increase of 11.4 percent in the second quarter and 52 percent in the first quarter. The increase was based on more than 60 projects awarded in Gauteng, the Western Cape and Kwazulu-Natal.  

Building costs increased most rapidly in Gauteng (rising by 31 percent), KwaZulu-Natal (11.9 percent) and the Western Cape (8.5 percent).

A drop in housing activity in the Western Cape had dampened output costs in new property development, it said.  

The report added that profitability had come under pressure because of the continued rise in input costs, with the availability of material playing a key role in the final deternination of the price.  

The average building rate a square metre rose rapidly last month and increased the overall rate for the third quarter to a smoothed average of R4200 from R3 900 in the last quarter.  
However, it said more than 80 percent of the projects surveyed last month had an average building rate of R5 000 or more a square metre.  

Tendering activity in the residential property market had eased significantly during the past 12 months, leading to more competition in tendering.  

If output costs continued to rise, the average building rate per square metre might start to exceed the purchase rate per square metre of the existing property market, particularly when house prices were cooling.  

The differential between new and existing properties was only marginal at a national scale during the last five years, with discrepancies only visible at a microgeographical level.  
Ignoring everything but the cost of the structure, it was better to build in Cape. Town, Bloemfontein and Limpopo, and cheaper to buy existing property in Ekurhuleni, Johannesburg and Port Elizabeth.  

The composite building cost index for building materials rose year on year to 11.8 percent in August, the report said.

(Business Report, 17 Oct 2006)

Source: Nedbank Property Talk