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Building plans approval decline as construction sector outlook brightens

by Kelvin Chiringa

Latest May data on plans for buildings approved by the City of Windhoek shows a 1.1% decrease month-on-month in the number of plans endorsed compared to an increase of 31.4% reported the prior month.

 On a yearly basis, approved plans decreased by 9.6% in May compared to an increase on 11.8% reported the prior year. 

The number of building plans completed decreased by 18% m-o-m after an increase of 178% reported the prior month.

Value of building plans completed in May decreased by 3.5% to N$55.9m following a sharp decrease of 42.6% reported the prior month. 

Both, the decrease in numbers and value of completed buildings were driven by a decrease in additions and wall which decreased by 11.6% and 46.6% respectively.

The construction sector posted strong growth by 23.7% in the first quarter, the strongest performance since 2015 when the sector expanded by 30.0%.

“This could be good news for the labour market, since the construction sector is labor-intensive and hence growth is expected to result in job creation. This in turn would support the wholesale and retail trade sector, since additional jobs create additional income and hence additional spending power,” says Klaus Schade of EAN. 

Value addition remained, however, below values recorded between 2014 and 2016, observes Economic Association of Namibia (EAN). 

Says Simonis Storm Securities, “Of interest to note is the significate upside of 23.7% (1Q2018) recorded in the construction sector compared to a contraction of 36.9% recorded in the 1Q2017. According to NSA, buildings completed were one of the major contributions in this sector, registering an increase of 104.5% in the 1Q2018 compared to a 1.5% recorded in the 1Q2017.”

“This increase was mainly observed in the central region that registered strong growth of 229.5% compared to a decline of 7.2% recorded in the 1Q2017. In our view, this trend will not continue in the 2Q2018 as the value and number of building plans in Windhoek have started to decelerate in May.”

The strong performance is caused by the low base a year earlier due to the contraction.

Growth in the overall economy remains weak, having recorded a 0.1% contraction although this was a slight improvement from a 0.4% decline in the first quarter of 2017.