1. Update of Stats SA Building Statistics AUG 2012 Data Dr Johan Snyman Medium-Term Forecasting Associates STELLENBOSCH 21 October 2012 MEDIUM-TERM FORECASTING ASSOCIATES Building EconomistsTel: (021) 881-3887 PO Box 7119Fax: (021) 881-3887 STELLENBOSCH, 7599 E-mail: mfa@iafrica.com

2. Vehicle sales show a V-shaped recovery, with a U-shaped revival in the case of residential buildings. In the case of BPP, Aug 2012 data were a little better than July 2012 figures. Since end-2009, BPP Res data are moving virtually sideways within a fairly narrow band

3. The trend in the cyclical movements correspond closely; vehicle sales in Sep 2012 were 12% higher than a year ago, with residential BPP -8% lower y-o-y in Aug 2012

4. The year-on-year improvement in the annual percentage change of the number of houses (left-hand scale) is currently 3%, pointing to a modest revival, with interest rates at their lowest levels since 1973 (right-hand scale inverted). Observe the “mini-growth cycle” developing in houses, similar to the period 1999/2004

5. The mortgage rate is an important factor influencing the demand for housing. In the past, lower interest rates have boosted housing demand levels. During the current cycle, lower interest rates had little positive effect, because …

6. … the availability of housing finance was curtailed by the National Credit Act, implemented in July 2007, and because …

7. … the banks applied stricter credit lending criteria during the global recession. They currently view their lending criteria as slightly “stricter” than “normal” given the prevailing monetary environment. One can conclude that they are being more cautious in the prevailing uncertain economic conditions.

8. In terms of (smoothed) numbers, private house plans in Aug 2012 were about 3% (y-o-y) better than in Aug 2011

9. In terms of square metres, dwelling houses plans are starting to recover (blue line), but the trend (red line) is still moving sideways

10. Data of townhouses and flats were 11.5% lower in Aug 2012 than in Aug 2011. As is the case with dwelling houses, a prolonged sideways movement at a low level is evident

11. Average sizes are currently at 102 square metres, compared to a low point of 86 sq m in 2009

12. The building cost of townhouses and flats is currently at R559 000 per unit

13. Gradual sideways movement … keep in mind that these plans passed data only reflect plans where structural changes are made

14. It seems as if the lower turning point in offices was recorded late in 2010. Smoothed Aug 2012 data are 28.3% higher than Aug 2011 figures

15. Office vacancy levels (vacancies line inverted) remain high at about 10.5% of available space

16. Since the low point recorded in April 2011, an improvement is evident. Aug 2012 figures are 4.5% higher than Aug 2011 data

17. The smoothed data for industrial buildings in Aug 2012 are 17.7% than Aug 2011 figures

18. Industrial vacancies remain relatively high (vacancies line inverted, right-hand scale), but dropped somewhat during recent months

19. This unstable time series is still on a downward trend

20. Total Building Plans Passed are still moving sideways … with real levels more or less on a par with those recorded a year ago

21. This comparison shows the relative performance of the various market segments since 1987. Long-term trends indicate a bottoming out of the downward movements, with industrial leading the way. Dwelling houses, the largest segment, remain flat

22. This comparison of long term trends shows the lagged pattern. Against expectations, the traditional long-term pattern is no longer evident, i.e. non-res seems to be leading during the current cycle. Res has lingered for much longer (2007-2012) in the downswing phase than before

23. BC is showing the normal lagged pattern

24. The BPP indicator showing the long-term trend has come out of a trough, but has since dropped again, with the lagging BC series approaching a trough. These data reflect twelve month moving totals

25. Both indicators are still reflecting a downward trend

26. Total BPP seems to be forming a trough, i.e. the movement is sideways, but for the lagging BC series there could be more downside potential …

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