1. STATE OF THE HOUSING INDUSTRY PRESENTATION - SOUTH AFRICA J. Mahachi NHBRC jeffreym@nhbrc.org.za February, 2016 IHA Secretariat

2. Summary Overview of NHBRC  NHBRC regulates the home building industry and is legislated through an Act of Parliament.  All Home Builders must be registered with the NHBRC, current active membership is about 17,000.  All new homes are to be enrolled with the NHBRC  Cash or mortgaged houses;  Speculative houses;  Social or affordable houses; and  Government subsidy houses.

3. Government’s Vision for Human Settlements Challenges in Housing Delivery in South Africa  Accelerate housing delivery (Current backlog in excess of 2.2 million),  Current delivery rate is low  Govt target to deliver 1.5 million housing opportunities (land and top structures) in next 5 years  use housing provision as a job creation strategy,  ensure access to property and home loans by all,  Access to finance and building materials by small emerging companies,  develop integrated and sustainable human settlements.  Availability of funds and land;  Limited physical production; and  Low profit margins particularly in the low income housing

4. SA Market Trends Analysis  Residential Building Market affected by: Economic trends; Household finances; Consumer confidence; Increasing trends in building costs; and Changing lifestyles.  Household affordability affected by: Household financial position; Property prices; Transaction costs; and Property running costs.

5. Trend Analysis IndicatorDec 2014/15Dec 2015/16y/y Growth Unemployment Rate25.1%25.5%1.6% Consumer Price Inflation5.3%5.2%-1.9% Av. Nominal House Price Govt Subsidised House (Social House) (40m 2 ) R110,000 ($6,800) R110,000 ($6,800) 0% Small Houses (80- 140m 2 ) R778,000 ($48,500) R830,000 ($51,700) 6.7% Medium sized homes (141-220m 2 ) R1,085,000 ($67,800) R1,224,000 ($76,500) 12.8% Large homes (221- 400m 2 ) R1,720,000 ($107,500) R1,892,000 ($118,200) 10% ZAR1 = US$16

6. Trend Analysis (Cont…) IndicatorDec 2014/15Dec 2015/16y/y Growth Construction Starts: - Single Family (Plot & Plan) 7,2646,245-16.3% - Multifamily (Sectional Title) 31,05230,199-2.8% - Govt Subsidy Houses (Social Houses) 84,37562,224-35.6% Gross Domestic Product (GDP) $349.86 bn$350 bn0.4% GDP Growth 1.3%0.7% -85.7% GDP Per Capita $6,090$6,086 0.1% Population 54.0m54.1m 0.2% Home Mortgage Interest Rate 9.25%9.75% 5.1%

7. Trend Analysis (Cont…) IndicatorDec 2014/15Dec 2015/16y/y Growth Consumer Price Index 111.0116.14.4% Home Ownership Rate 60%62%3.2%

8. Trend Analysis (Cont…)

9. Residential Building Activity 1994-2015 SEGMENT BUILDING PLANS APPROVEDBUILDINGS COMPLETED UNITS% OF TOTALUNITS% OF TOTAL Houses of <80m 2 694,70743.3554,20446.6 Houses of ≥80m 2 481,79130.0319,52326.8 Flat and Townhouses427,39726.6316,70726.6 Total1,603,8951001,190,434100 1 Private Sector Financed Source : Stats SA

10. Residential Building Activity (Jan – Dec 2015 % Share) (18,076) (15,868) (21,680) (10,534) (14,611) (11,186)

11. Remodelling – Jan to Dec’15 (Alterations & Additions) 20142015% Change Plans Approved (m 2 ) 2,969,3723,167,4376.3% Buildings Completed (m 2 ) 1,032,8981,183,12112.7%

12. Number of Construction Starts (Enrolment) Target 54,000

13. External Factors affecting the Economy  Impact of China’s Economic Slowdown  Lower Chinese demands for Commodities, such as:  Platinum;  Palladium;  Gold;  Manganese; and  Diamonds.  Rising US interest rates  Weak commodity prices  Capital Outflow and Foreign Direct Investments (FDI)  Investment Grading (Down-Grading) by Rating Agencies

14. Internal Factors affecting the economy  Regulatory Impact Assessment (RIA) and Policy implementation  Weak commodity prices  Infrastructure gap  Inadequate power supply  Impact of drought on economic growth and inflation  Declining Gold and Foreign Exchange Reserves  Implementation of the Immigration Act and visa regulations  Protracted industrial action  Labour tensions  Depreciation of the rand

15. Govt’s Nine Point Action Plan 1. Resolving the energy challenge; 2. Upping the agricultural value chain; 3. Beneficiation through adding value to mineral resources; 4. More effective implementation of higher impact industrial policy plan; 5. Encouraging private sector investment; 6. Moderating workplace conflict; 7. Unlocking the potential of SMMEs, cooperatives, townships and rural enterprises; 8. Reform of state-owned companies, broadband roll out, water sanitation and transport infrastructure and 9. Operation Phakisa which aims to grow the ocean economy – such as shipping and storage of energy products.

16. Thank You