Property Industry Comments On 2018 Budget Speech
Category News Flash - Budget News
The last week has been quite an eventful week in South African politics – with especially the changes in the Cabinet and the 2018 Budget speech the most notable of all in regards to its effect on the property industry and market as a whole.
According to Rudi Botha, CEO of BetterBond, the increases in VAT, income and fuel taxes are clearly disappointing from our point of view because they will limit the ability of ordinary households to qualify for bonds and afford their own homes … This is a blow for a real estate market that has been turning positive for the past few months. National Deeds Office statistics show, for example, a year-on-year increase of 2,25% in the last quarter of 2017 following two years of declining numbers, and our own statistics* show an increase of almost 11% in bond approvals during that period, indicating a continued rise in registrations this year.
However, he says, tax increases were expected in the light of the tax revenue shortfall revealed by the Finance Minister a few months ago (now revised to R48bn) and looking at the bigger picture, this Budget is clearly designed to do the essential job of proving to investors that SA has financial discipline and stability.
“This is the only way we are going to attract the funds we need from both foreign private investors and local investors who have been sitting on cash to re-fire SA’s economy, boost the growth rate and start creating new jobs“.
“And in the longer-term, increased employment is the real key to sustained growth and development in the real estate sector, so BetterBond also strongly supports the forthcoming Job Summit and Youth Working Group announced by President Ramaphosa during his recent State of the Nation address, as well as the Budget allocations for internship incentives and the establishment of a Youth Employment Service“.
“We also applaud the vision behind the new focus on educating our youth to be full players in the Fourth Industrial Revolution, while also seeking to re-vitalise SA’s manufacturing sector and so immediately start to create opportunities for entrepreneurs and lower-skilled workers who have been let down over the past decade by our mismanaged State education system.”
Botha notes that this Budget should also help SA avoid a downgrade to total junk status – and that this should underpin the Rand, keep inflation down and obviate the need for any interest rate increases in the near future, which will be a further positive for property going forward.
According to Jacques du Toit, Senior Property Economist at Absa Home Loans on the affordability of property, the increase in VAT and the below inflation tax relief on personal income tax, and the increased fuel levies – will have negative impact the consumer finances.
This will indirectly impact on property affordability. Any property up to R900 000 is still exempted from transfer duties. Low CPI and the strong rand will increase the possibility of lower interest rates, which can have a positive effect on the property market in the long run.