"Growth in house prices has slowed as business confidence declines, but South Africa remains one of the top markets in the world for building supplies inputs."
Growth in house prices slowed to a rate below 10% in November 2007 even though economic growth was at a healthy 4,7% in the third quarter of 2007 – but with a tenth of all houses being sold to foreigners and a fifth to those buying second properties, South Africa’s housing market remains one of the strongest in a world fearful of a sub-prime debacle.
And high quality inputs into existing and new properties are seeing the building products market boom. Marketing manager of the electrical underfloor heating division of Danfoss, Claus Jakobsen says, “South Africa has for the last two years been the top market in the world for growth of the Danfoss underfloor heating. This market has shown exceptional strength and resilience.”
Absa has noted that sales of cement too, rose 57,8% from 2000 to 2006 and are expected to rise to 17m tons this year from 14m tons in 2006.
The slump in the housing market appears to have been caused by a dip in business confidence which the FNB Residential Property Barometer says has “gone down sharply”. Anticipated high municipal rate hikes some of which only come into effect in July are also depressing the market. Interest rates that have not stopped their climb are also having an impact.
“Yet,” Jakobsen says, “when many in the building trade saw a rapid petering off of activity toward the end of the year, our contractors saw very high demand and begin 2008 with very strong delivery and installation books. While we are getting feedback from the market that there are concerns about beginning new building projects – although massive residential projects are underway – it seems as though the market is looking at ways to add value to what they have. We are seeing increased interest in underfloor heating as one of the sure-fire ways to show that a property has real quality and value.
“Eskom’s load shedding and the pressure it is placing on us all to conserve electricity coupled with a 14,5% price increase has also seen the fact that underfloor heating can cut at least 25% off winter heating bills, as a major incentive to include underfloor heating in quality renovations or building project,” Jakobsen said.
He pointed out too that a demand by foreign buyers for effective heating and insulation was also having an impact on the market. “According to FNB’s Residential Property Barometer five percent of all residential property buyers in South Africa are foreign and they tend to go for high-end properties. They expect top class finishes and quality. Their demands are having a very influential effect on the market, especially in Kwa Zulu Natal where they form a tenth of property buyers and eight percent of house-buyers in the Western Cape.”
A very strong rental market is also spurring demand for quality finishes, with a fifth of all home purchases in KZN going to those who were buying a second property to rent, according to Standard Bank’s Residential Property Gauge.
“We’re looking at strong growth again in 2008,” Jakobsen said. “Between 2000 and 2006, South Africa built almost half a million residential units (425 147 according to StatsSA) and built 11,5 million square metres of commercial buildings. South Africa does not have the sub-prime concerns of the rest of the world and so while we will see a tightening of property markets globally, this will remain one of the few areas of the world where property development will continue.”
Major projects like the R3,5bn Boschendal development which will see 500 units built with a retirement village and a hotel, and Spier’s 3 000 house development with an African art centre will also see a demand for high quality inputs like underfloor heating.
“The desire for change that is being manifested politically and too concerns globally about living lives of quality whether in the food people eat or care about exercising is manifesting more and more often in their demands for quality living. Comfortable homes that express the values people display in their lives. 2008 is going to be a good year,” Jakobsen said.
* Danfoss, the internationally respected global giant, which also manufactures other industrial and domestic heating applications, has been in South Africa for six years and with 15% of market share is the market leader in South Africa. Internationally Do It Yourself is roughly 40% of the market with South African lagging at around five percent to 10% of sales. 90% of thermostats sold through CTM tile stores are intelligent thermostats – “they are expensive, but have the best capacity to control heating, keep costs down and help protect the environment,” Claus Jakobsen marketing manager Danfoss explains.
For more information contact:
Claus Jakobsen, marketing manager, Danfoss 082 564 0868 or email:
More articles by Claus can be found here.