executive summary sensemaking update ytd nov 2013
DESCRIPTION
In this summary of our latest Sensemaking Update we put into perspective the context of the Building and Construction Industry. We explain our whole systems approach to understanding the context and how the different components must be understood for strategic benefit. It assists strategic organisations to DEFINE and by implication, CONFINE their market. By redefining the market new and unexplored markets can be identified.TRANSCRIPT
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BMI-BRSCU SENSEMAKING UPDATE DECEMBER 2013 (YTD NOVEMBER)
We want to to remind Subscribers that we follow a whole systems approach to understanding the
industry context and its linkages in the role of Building and Construction as an engine for growth and
wealth creation in the economy with Property a preferred Investment.
The growth in GDP is
determined by
Investment in Gross
Fixed Capital Formation,
which in turn is
determined by
Investment in Building
(Private and Public
Residential and Non
Residential and
Unrecorded Additions
and Alterations), and
Construction (as well as
GFCF items unrelated to
building and construction
such as Computer
related Equipment,
Transfer costs,
Machinery and
Equipment, and Transport Equipment) (See Slide 10 in the Industry Dashboard presentation).
Investment in Building is of course influenced by Mortgage Advances (New and Existing buildings),
Building Plans Passed and Buildings Completed, and Construction by Government Infrastructure
spend.
In this Sense-making Update for the YTD November 2013 as well as the Industry Dashboard we have
analysed all the information for YTD Q3 2013 for MORTGAGE ADVANCES, GFCF as well as the first
eleven months of 2013 for the other series (with 9 months for Domestic Cement). It therefore provides
a good basis for understanding the past year as well as an indication of what can be expected in 2014.
We of course monitor the actual performance against forecast and our interactive models provide the
means of continuous updating of the outlook thus providing a very useful strategic monitoring system.
The Sensemaking Update and the Industry Dashboard takes a holistic systemic view and it can be seen that the YTD Forecast for MORTGAGE ADVANCES for the Construction of New Buildings shows an increase on 2012 (but – 40.9% of the 2007 level); GFCF Residential, Non Residential and Total Building shows healthy growth and Construction is expected to decline. This of course has an impact on building material sales. The majority of other indicators indicate a turning point and the YTD Forecasts generally displays a growth pattern for 2013 vs 2012.
• Mortgage Advances on EXISTING BUILDINGS, CONSTRUCTION OF NEW BUILDINGS, VACANT LAND and TOTAL GROSS NEW MORTGAGE LOANS AND RE-ADVANCES shows an average WEIGHTED INCREASE of + 3,43%
(R MILLION) (R MILLION)
Listed Property (Market Cap) Formal Empl in Bldng & Constr
Mortgage Advances Land included
Urban Housing Backlog
Mortgages Outstanding
Land included
Inv in Affordable Housing Investment in Building
4.84% 31.25%
Government Budget Gross Fixed Capital Formation
29.75% 18.37%
31.81%
Transfer Duty Investment in Construction
R 2 995 530
Gross Domestic Product
R 550 362
427 16214.71
(R MILLION)
R 5 371 483R 210 997
THE ROLE OF BUILDING, CONSTRUCTION AND PROPERTY IN THE ECONOMY: 2012
Residential Property (Units*Millilon)
R 3 870 R 1 058 207
Non Res Property (m2*million)
342
Average Annual Housing Need (units)
R 43 093 249 025
R 891 199
R 171 981
R 253 461
R 1 064 971R 1 331 060
R 175 093
(Copyright) BMI-BRSCU
2 819 535
Investment in Infrastructure (3 years)
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• GFCF RESIDENTIAL shows an INCREASE of + 9,93% • GFCF NON RESIDENTIAL shows an INCREASE of + 7,86% • GFCF TOTAL BUILDING shows an INCREASE of + 6,84% GFCF CONSTRUCTION shows an INCREASE of + 3,38% • Domestic Cement Sales shows a decrease of + 3,87% and • Local Building Lumber Sales shows an increase of + 7,14%. Residential BPP (in m2) recorded a decline of – 0,02% in 2012 vs 2011 and Non Residential BPP showed growth of + 2,06%. Total BPP (in m2) ended 2012 with marginal growth of + 0,66% compared to 2011. At this advanced stage of 2013 it is expected that the • Private Residential BPP (in m2) will increase by + 4,99% in 2013 vs 2012 while the • Private Non Residential BPP will increase by + 17,63% and • Total Private BPP will increase by + 8,96%. Residential BC (in m2) recorded a decline of -3,98% in 2012 vs 2011 and Non Residential BC showed growth of +5,58%. Total BC (in m2) ended 2012 with growth of + 5,58% vs 2011. Similarly it is expected that the • Private Residential BC (in m2) will increase by + 6,89% in 2013 vs 2012 while the • Private Non Residential BC will increase by + 16,42% and • Total Private BC will increase by + 9,85%.
In the table below it can be seen that the Investment in Building Table that Private Sector (Residential and Non Residential) BC comprises just less than 35% of Total Investment in Building (the rest comprises Public Residential, Non Residential and Unrecorded Additions and Alterations). Nevertheless it is the MOST IMPORTANT, CURRENT INFORMATION AVAILABLE on the development of the Industry and this is the reason why we spend a considerable amount of time to analyse it exhaustively.
Building Investment relates to both Private and Public Building and it is expected that Public Sector Residential and Non Residential will contribute to an overall increase of about + 2,18% in Total Investment in Building for 2013 compared to 2012 (in constant 2012 Rand Value).
A detailed forecast of the Investment in Building and Construction for the period 2013 – 2020 (in constant 2012 Rand values) can be seen in the next Table.
It can also be seen in the table following the forecast that Total Investment in Building is expected to average more than R193 Billion annually, whilst Investment in Construction is expected to average just more than R159 Billion per annum
– thus a total investment in Building and Construction of nearly R353 Billion annually. This would translate into an Investment in Total Building and Construction of about R1,058 Trillion over the next 3 years, thus this top-down estimate of forecast investment provides some support for the much vaunted Infrastructure programme of Government.
Recorded* Recorded** Unrecorded Total
PRIVATE AND PUBLIC M2*1000 M2*1000 M2*1000
Dwelling-houses < 80 m2 903 903
Dwelling-houses > 80 m2 2806 2806
Townhouses & Flats 1105 1105
Other (Incl. hotels & casinos) 46 46
Additions & alterations 1467 1467
PUBLIC RESIDENTIAL
Affordable Housing 10115 10115
General Government 644 644
Public corporations 15 15
Private Business Enterprises 4305 4305
TOTAL RESIDENTIAL
PRIVATE NON-RESIDENTIAL
Offices 463 463
Shops 499 499
Industrial & warehouse 1128 1128
Other 201 201
Additions & Alterations 550 550
PUBLIC NON-RESIDENTIAL
General Government 2801 2801
Public Corporations 1120 1120
Private Business Enterprises 5435 5435
TOTAL NON RESIDENTIAL
Unrecorded Res Adds and Alts 7907 7907
Unrecorded Non Res Adds and Alts 755 755
GRAND TOTAL 9167 14319 18777 42263
* StatsSA (Monthly 6 weeks in arrears) 21.69% 33.88% 44.43% 100.00%
55.57% 44.43% 100.00%
INVESTMENT IN BUILDING: 2012: M2*1000
Sector and Segment
** SARB (Quarterly in arrears)
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2013-2020 Average
R*Million R*Million % %
23 623 2 953 1.53% 0.84%
117 565 14 696 7.60% 4.17%
61 128 7 641 3.95% 2.17%
4 523 565 0.29% 0.16%
56 100 7 012 3.62% 1.99%
201 072 25 134 12.99% 7.13%
87 809 10 976 5.67% 3.11%
395 49 0.03% 0.01%
55 465 6 933 3.58% 1.97%607 680 75 960 39.26% 21.53%
25 115 3 139 1.62% 0.89%
35 950 4 494 2.32% 1.27%
32 673 4 084 2.11% 1.16%
9 042 1 130 0.58% 0.32%
46 733 5 842 3.02% 1.66%
157 348 19 668 10.17% 5.58%
37 734 4 717 2.44% 1.34%
238 079 29 760
582 672 72 834 37.65% 20.65%
316 199 39 525 20.43% 11.21%
41 204 5 151 2.66% 1.46%
1 547 755 193 469 100.00% 54.85%
576 627 72 078 45.26% 20.43%
462 205 57 77636.28% 16.38%
235 298 29 412 18.47% 8.34%
1 274 130 159 266 100.00% 45.15%
2 821 885 352 736 100.00%
1 058 207
1 763 678
3 527 356
©BMI-BRSCU
Affordable Housing
General Government
PUBLIC RESIDENTIAL
INVESTMENT IN BUILDING & CONSTRUCTION: 2013-2020: LMR SOYUZ SCENARIO
SECTOR AND SEGMENT
PRIVATE RESIDENTIAL
Dwelling-houses < 80 m2
Dwelling-houses > 80 m2
Townhouses & Flats
Other (Incl. hotels & casinos)
General government
Public corporations
Private business enterprises
TOTAL CONSTRUCTION
TOTAL BLDNG AND CONSTR
3 years (2013-2015)
5 years (2013-2017)
8 years (2013-2020)
Unrecorded Res Add's and Alt's
Unrecorded Non Res Add's and Alt's
GRAND TOTAL
CONSTRUCTION
General Government
Public Corporations
Private Business Enterprises
TOTAL NON RESIDENTIAL
Shops
Industrial & warehouse
Other
Additions & Alterations
PUBLIC NON-RESIDENTIAL
Public authorities.
Private Business EnterprisesTOTAL RESIDENTIAL
PRIVATE NON-RESIDENTIAL
Offices
Additions & alterations
PROGNOSIS: INVESTMENT IN BUILDING & CONSTRUCTION: YTD ACTUAL VS FORECAST BY SECTOR AND SEGMENT (CONSTANT 2012 VALUES)
2011 2012* FC 2013 FC 2014 FC 2015 FC 2016 FC 2017 FC 2018 FC 2019 FC 2020
- Dwelling-houses < 80 m2 22.68% -5.01% 1.00% 11.46% 6.54% 0.45% -0.46% 3.33% 2.02% -2.05%
- Dwelling-houses > 80 m2 6.36% 1.78% 9.45% 3.78% -0.48% -5.88% -6.49% 7.55% 6.47% 2.52%
- Townhouses & Flats -15.87% 12.67% 23.39% 7.53% 3.07% -2.57% -1.04% 18.44% 16.48% 11.54%
- Other (Incl. hotels & casinos) -30.00% -66.88% 76.08% 22.39% 0.62% -4.83% -5.44% 8.77% 7.69% 3.71%
- Additions & alterations 4.37% -18.55% 20.36% 1.63% -1.55% -6.93% -9.69% 3.65% 2.37% -1.68%
0.93% -4.45% 14.70% 4.87% 0.57% -4.88% -5.46% 8.95% 7.87% 3.88%
PUBLIC RESIDENTIAL
- Affordable Housing 15.02% 2.50% -2.65% -5.40% -1.95% 1.50% 2.00% 2.50% 3.00% 3.00%
- General Government -20.94% -88.96% 5.79% 6.10% 7.90% -2.30% -4.50% 6.10% 8.20% 9.10%
- Public corporations -76.92% 266.67% -1.09% 6.10% 7.90% -2.30% -4.50% 6.10% 8.20% 9.10%
- Private Business Enterprises -20.77% -40.81% -26.18% 16.62% 65.59% 9.90% -0.58% -4.48% 10.49% 32.83%
TOTAL PUBLIC RESIDENTIAL BC -7.76% -33.97% -8.03% -0.46% 14.17% 4.10% 0.76% 0.24% 5.75% 13.65%
TOTAL RESIDENTIAL (Incl AH) BC -4.82% -23.37% 2.15% 2.22% 7.16% -0.24% -2.11% 4.12% 6.74% 9.05%
TOTAL GFCF RES (Excludes AH) BC 64.76% -34.08% 5.23% 6.75% 11.96% -1.05% -4.06% 4.94% 8.58% 11.87%
PRIVATE NON-RESIDENTIAL BC
- Offices -38.35% 25.20% 80.05% -15.44% 12.51% 8.63% 12.61% 12.61% 5.47% -4.89%
- Shops -5.68% -21.55% 19.78% -10.95% 18.51% 17.01% 17.50% 17.30% 9.69% -1.24%
- Industrial & warehouse -19.09% 40.13% -9.07% -14.63% 13.64% -11.76% 7.11% 15.49% 2.83% -2.46%
- Other 30.19% -22.04% 15.63% -17.85% 9.01% 11.92% -1.47% -19.57% -36.72% -4.89%
- Additions & Alterations -11.52% -14.02% 21.88% -9.54% 20.28% 32.64% 16.12% 14.31% 10.19% -8.97%
TOTAL PRIVATE NON-RES BC -15.86% 2.58% 23.55% -13.32% 15.42% 11.53% 12.76% 12.89% 5.75% -4.92%
PUBLIC NON-RESIDENTIAL BC
- General Government 13.04% 23.02% 22.55% 2.90% 8.00% 6.90% -7.00% -4.40% 6.80% 9.20%
- Public Corporations -3.56% -37.41% -41.59% 2.90% 8.00% 6.90% -7.00% -4.40% 6.80% 9.20%
- Private Business Enterprises -3.06% 6.16% 2.27% 11.62% 4.66% 4.53% -16.91% -16.06% 8.02% 21.85%
TOTAL PUBLIC NON-RES BC 0.88% 9.48% 3.09% 7.93% 6.01% 5.51% -12.78% -10.87% 7.44% 15.85%
TOTAL GFCF NON RES BC -3.80% 7.79% 7.86% 2.26% 13.63% 12.54% -1.41% 1.59% 13.57% 15.47%
TOTAL GFCF RES AND NON RES BC -7.68% -13.46% 6.84% 3.97% 9.63% 3.76% -5.48% -0.34% 7.55% 9.91%
- Unrecorded Res Additions and Alterations 4.37% -18.55% -27.92% 1.63% -1.55% -3.11% -1.18% 15.39% 3.25% -0.20%
- Unrecorded Non Res Additions and Alterations -11.52% -14.02% 16.80% -9.54% 20.28% 11.88% 6.90% 6.90% 6.90% 6.90%
TOTAL UNREC ADD'S & ALT'S BC 2.84% -18.18% -24.02% 0.13% 1.10% -0.95% 0.13% 13.92% 3.84% 0.99%
TOTAL INV IN BUILDINGS COMPLETED -2.68% -12.58% -1.88% 1.85% 6.48% 2.67% -3.60% 2.48% 6.23% 7.35%
BC as % of Total Inv in Bldng 23.38% 26.15% 31.36% 30.32% 29.95% 29.37% 30.89% 33.34% 33.57% 31.32%
Priv Sector as % of Total Inv in Bldng 48.57% 49.73% 49.62% 48.27% 46.99% 45.81% 47.97% 52.32% 52.13% 48.78%
CONSTRUCTION
9.50% 5.00% -2.45% -6.00% -1.46% 8.77% 11.23% 11.62% 12.43% 8.61%
-11.33% 4.00% 3.52% -13.98% -9.95% -0.77% 1.25% 1.33% 1.73% -2.12%
-7.49% 6.25% 17.42% -5.72% -1.19% 9.05% 11.49% 11.86% 12.66% 8.82%
TOTAL INV IN CONSTR -4.56% 5.25% 3.38% -9.68% 7.94% 19.07% 21.66% 21.99% 22.76% 18.47%
TOTAL INV IN BLDNG AND CONSTR -3.55% -4.41% 0.77% -4.11% 0.79% 3.64% 1.45% 5.08% 7.46% 6.20%
TOTAL GFCF CONSTRUCTION -4.56% 5.25% 3.38% -9.68% -5.19% 4.79% 7.29% 7.79% 8.69% 5.09%
2.87% 6.21% 4.68% -4.45% 0.99% 4.33% 1.54% 4.38% 8.23% 7.01%
Source: BMI-BRSCU
- Public corporations
- Private Business Enterprises
TOTAL GFCF BLDNG AND CONSTR
PRIVATE RESIDENTIAL BC
TOTAL PRIVATE RESIDENTIAL BC
- General government
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The impact of the growth scenarios of the Investment in Building and Construction on Building Material Sales can be seen in the following graphic.
The Sense-making Update analyses the StatsSA data of Building Plans Passed (BPP) and Buildings Completed (BC) and this provides us with an important feel for the trends in the Building Industry. The Industry Dashboard takes a more systemic view including Mortgage Advances, Gross Fixed Capital Formation (GFCF) and Cement and Lumber sales. It therefore provides us with an overall view of the Building and Construction Industry as well as Building Material Sales.
All the Power-point presentations and the XCell spreadsheets of the Industry Dashboard are posted on the website.
Dr. Llewellyn B Lewis, Principal Consultant, BMI Building Research Strategy Consulting Unit cc, 9 Adrienne Street, Strathavon, Sandton, PO Box 784133, Sandton 2146. [email protected] www.strategicforum.co.za Tel: (011) 884 2075 Cell 082 884 0063 Fax 086 6472 494
January 2014
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Building Materials (Lower Middle Road Scenario) 75 572 76 293 84 308 96 613 112 646 122 103 131 176 134 227 121 280 120 490 104 446 107 031 109 114 114 428 116 577 112 178 115 958 122 800 130 567
Building Materials (High Road Scenario) 75 572 76 293 84 308 96 613 112 646 122 103 131 176 134 227 121 280 120 490 104 446 120 113 136 929 154 729 173 297 178 496 203 485 227 904 250 694
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50 000
100 000
150 000
200 000
250 000
300 000
R M
ILL
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The Market for Building Materials: 2002-2012Lower Middle and High Road Scenarios: 2013-2020 (R Million) (Constant 2012 Values)
(Source: MFA; StatsSA; SARB; BMI-BRSCU Workings)