Deep cut in construction spending
Stockbroking firm IJG Securities forecasts a contraction in construction activities for 2017.
STAFF REPORTER
A total of 131 building plans were approved in Windhoek in December, with a value of N$108.2 million.
For the 2016 calendar year the City of Windhoek approved 1 872 building plans, well below the 2 467 plans approved in 2015. Cumulatively 2016 witnessed the approval of N$1.95 billion worth of plans, also well below the 2015 figure of N$2.2 billion, according to IJG Securities.
“The 12-month cumulative number of building plans approved ticked up slightly at the end of 2016. On a 12-month cumulative basis, 1 872 building plans were approved, 24.1% less than the same measure for December 2015.
“This figure has nearly halved from the peak in September 2013 to lows last seen in 1997. As a leading indicator for economic activity in the country this reinforces our view that we will see negative economic growth for the 2016 reporting period,” said IJG.
“A lack of serviceable land has often been cited as the reason for the slowdown in building plans. The municipality has indicated that there is a high demand for land, but little land left around Windhoek that can be developed.
“As a result, additions to existing property have exceeded new construction fourfold. However, the slowdown in additions points to less potential value in additions or possibly saturation of the available space,” said IJG.
“At the beginning of 2016, the outlook for construction was relatively positive due to several large government projects expected to commence within the year. We revised this view several times during 2016, and our suspicions were confirmed at the most recent midterm budget. Government has cut both the development and operational budgets quite aggressively,” the stockbroking firm said.
“Spending on construction was cut by a material N$1.5 billion in this financial year alone and a moratorium has been placed on all government construction projects going forward. This should have a negative effect on economic activity in general, but the construction sector in particular. Thus, we continue to forecast a contraction in the construction industry for 2017,” IJG concluded.
A total of 131 building plans were approved in Windhoek in December, with a value of N$108.2 million.
For the 2016 calendar year the City of Windhoek approved 1 872 building plans, well below the 2 467 plans approved in 2015. Cumulatively 2016 witnessed the approval of N$1.95 billion worth of plans, also well below the 2015 figure of N$2.2 billion, according to IJG Securities.
“The 12-month cumulative number of building plans approved ticked up slightly at the end of 2016. On a 12-month cumulative basis, 1 872 building plans were approved, 24.1% less than the same measure for December 2015.
“This figure has nearly halved from the peak in September 2013 to lows last seen in 1997. As a leading indicator for economic activity in the country this reinforces our view that we will see negative economic growth for the 2016 reporting period,” said IJG.
“A lack of serviceable land has often been cited as the reason for the slowdown in building plans. The municipality has indicated that there is a high demand for land, but little land left around Windhoek that can be developed.
“As a result, additions to existing property have exceeded new construction fourfold. However, the slowdown in additions points to less potential value in additions or possibly saturation of the available space,” said IJG.
“At the beginning of 2016, the outlook for construction was relatively positive due to several large government projects expected to commence within the year. We revised this view several times during 2016, and our suspicions were confirmed at the most recent midterm budget. Government has cut both the development and operational budgets quite aggressively,” the stockbroking firm said.
“Spending on construction was cut by a material N$1.5 billion in this financial year alone and a moratorium has been placed on all government construction projects going forward. This should have a negative effect on economic activity in general, but the construction sector in particular. Thus, we continue to forecast a contraction in the construction industry for 2017,” IJG concluded.
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