1. Update of Stats SA data and other Leading Indicators Dr Johan Snyman Medium-Term Forecasting Associates STELLENBOSCH 17 March 2011

2. The SARB leading indicator is based on 12 indicators that lead the business cycle. This composite indicator gives early warning signals of upper and lower turning points – it is currently marking time

3. Vehicle sales are performing well, but real residential plans passed seem to be moving sideways at a very low level

4. The percentage improvement in real residential plans passed has lost upward momentum, moderating from +7% to +4%

5. Despite significant declines in interest rates, the upward percentage momentum in house plans passed (larger than 80m²) has dropped from +16% to +11%

6. Mortgage finance is difficult to come by because of the stringent requirements of the National Credit Act …

7. The consequences of the National Credit Act and the stricter lending requirements of the banks are clearly reflected in key building statistics … Consider the next graph that shows that despite much lower interest rates, a gap has opened up between interest rates and the number of square metres for house plans passed … this shows that effective demand has dropped sharply Also consider the second graph that shows an unusual gap opening up between lower interest rates and new mortgage loans granted for the construction of new houses

8. Square metres have fallen despite significantly lower interest rate levels …

9. There seems to be very little money available for new homebuilding …

10. … consequently, plans and completions for houses larger than 80m² have dropped to historic lows

11. In terms of square metres, the Jan 2011 figures were just as poor as the lowest point recorded in Jan 2010

12. Townhouses and flats data were just a little better in Jan 2011 than in Dec 2010 – could Dec 2010 be the trough in the cycle?

13. Still performing poorly … but a trough seems to be forming

14. Average sizes seem to be rising gradually

15. The building cost of townhouses and flats has recently risen to about R530 000 per unit

16. The demand for new office space has dropped to a new low in Jan 2011 …

17. … because real office rentals are under severe pressure and office vacancies are still high on a nationwide basis (vacancies line inverted)

18. Closer inspection reveals that a shopping mall in KwaZulu-Natal was responsible for 66% of the higher Jan 2011 figure, another shopping centre in Mpumalanga contributed 27%. That leaves 6% for the remainder of the country. Conclusion: the higher Jan 2011 figure is a flash-in-the-pan …

19. The Jan 2011 figures were poor and lower than in Jan 2010 …

20. … because industrial vacancies are still relatively high (vacancies line inverted)

21. An earlier bounce back petered out in Dec 2010/Jan 2011

22. Overall data for Jan 2011 were poor, but somewhat better than the Jan 2010 low point

23. This comparison shows the relative performance of the various market segments since 1987. Only shops showed somewhat of an improvement because of two malls in KZN and Mpumalanga

24. This comparison shows the lagged two-year pattern (residential is still dropping and non-residential has further to fall)

25. Building Plans Passed seems to be bottoming out, and the lagging Buildings Completed time series is still tending downward…

26. BPP shows an uptick on account of the two shopping malls in KZN and Mpumalanga, but the downward trend is set to continue …

27. BPP could be bottoming out … but the lagging BC series will probably decline further

28. In deflated value terms, it seems as if BPP total could be approaching a trough, but BC is expected to fall further

29. Thank you for your attention … Johan Snyman mfa@iafrica.com