RISING GAP
Soaring house building costs hinder residential developers
Rapidly rising building and land costs amid stagnating house price growth in the existing home market are largely to blame
It now costs at least 30% – or R629, 500 on average – more to build a new house from scratch than buying an existing one. It is the largest replacement cost gap in nearly 14 years, according to latest housing data from the banks. Rapidly rising building and land costs amid stagnating house price growth in the existing home market are largely to blame. FNB property strategist John Loos said the average price differential between building a new house and buying a second-hand one of the same size has accelerated to 30.4% in the fourth quarter of 2016. That is up from an average 21% during the preceding two years and the highest level since early 2003. The only time in the past 20 years that it cost roughly the same to build or buy was in 2007-08 when house price growth was still outpacing building cost inflation.
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