Good news for Sellers of residential homes! This is the largest replacement cost gap in almost 14 years, according to latest housing data from the banks. Rapidly rising building and land costs amid stagnating house price growth in the existing 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. Up from an average 21% during the preceding 2 years and the highest level since early 2003. The only time in the past 20 years that it cost about the same to build or buy was 2007-08 when house price growth was still outpacing building cost inflation. Loos said the widening replacement cost gap is making it more difficult for residential developers to bring competitively priced stock to market. Residential building activity is therefore likely to come under further pressure over the coming months. Growth in residential building plans completed had already slowed to a measly 0.6% in the 3 months ending November, down from 8.15% for the three months to October (year on Year). Loos noted that the amount of new residential space completed in the 3rd quarter was only about half of what it was back in the building boom of 2005 - 07, ABSA figures reflect a similar trend, with the bank's house price index showing a hefty 16.1% increase in the price of new houses in the third quarter compared with an average increase of only 3.5% for existing houses. That brought the average price of a new house to about R2.02m versus R1.39m for a second hand one. The implication is that it was about R629,500.00 or 31.2% cheaper to have bought an existing house than to have a new one built. The rising cost gap comes on the back of an average increase of 10.3% in building costs to R6,539m2 and 14.1% in vacant stand prices to R736,300 in the third quarter SOURCE - BUSINESS DAY