Johannesburg — THE residential building sector remained under pressure during the first half of this year despite several interest rate cuts to stimulate demand, according to data released by Statistics SA yesterday.

Conditions in the building industry remained grim for much of th e year despite the Reserve Bank's aggressive 500 basis-point interest rate cuts since December. But some analysts said yesterday there were also signs that the worst may be over for the sector .

In the six months to June the real value at constant 2005 prices of all new building plans approved by local authorities declined 28% compared with the first half of last year .

The residential building sector recorded the biggest drop of 45,3%, or R7,2bn less than the R15,9bn of the same period last year. Drops were recorded for additions and alterations, which were down 10,5%, and non- residential buildings, down 10,2%.

The latest figures follow a continuous decreasing trend since the peak of 36,3% growth in 2005.

Johan Snyman, director of Medium-Term Forecasting Associates, said if the data were considered in relation to data over the past two years, it indicated that the residential building market was beginning to "bottom out" from the low levels last seen during the 1998 Asian stock and currency market crash. He believed that by the end of the year the effect of the interest rate cuts should start to feed into the sector.

"The total residential market has been in decline since mid-2007, but it is now in the process of bottoming out. By the end of this year the positive impact of low interest rates should start to filter through, and from early next year we should expect a revival in the residential market," Snyman said.

"The sector has reached its worst levels, and there are signs that the trend is bottoming out. There are positive factors in place -- such as low interest rates and salary adjustments -- to support the revival in the residential sector. But this revival will not happen immediately."

First National Bank chief economist Cees Bruggemans said the residential building sector had reached its worst point and should start showing signs of recovery.

"Effectively year-on-year changes have probably turned the corner and the cycle is starting to improve, even though builders are going to take a while to see the improvement.

"The statistics are certainly not deteriorating any further," he said.

Senior Property Analyst at Absa Bank Jacques du Toit said residential building activity will remain depressed for the rest of the year, with a recovery expected only next year.