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The real estate industry - what the Budget 2017 means for the property market

While the increased transfer duty threshold is a welcome relief, real estate experts all agree that it is not all good news for the home owners.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa,  says that the increased expenditure on higher education is a key element to creating a skilled workforce and ensuring that the future generations can get on their feet financially.  “Education is the only way that the next generation can improve their situation and make a better life for themselves and the generations that follow them,” he adds.

Goslett says that while a fuel and RAF levy increase will add to the financial pressure felt by consumers who have already dealt with interest rate hikes, electricity tariff increases and food price escalation, relief will be provided in the affordable housing market through an increase in the threshold above which transfer duty is paid. The threshold will increase from R750 000 to R900 000. “The increase in the threshold should make it easier for many more people to get into the housing market. Most banks require deposits of between 10% and 30% percentage of the asking price of a home before they will finance the transaction. Deposit requirements, along with transfer duty fees made it impossible for many consumers to get their foot in the door – the change in threshold should change this to some degree,” says Goslett. “The annual allowance for tax free savings accounts being increased to R33 000 should also encourage people to put money aside for housing deposits and other costs associated with purchasing a home. South Africa is known for having a poor savings culture, so any assistance from the government to encourage people to save is most welcome.”

Goslett agrees with the message from Minister Sisulu that consumers in the lower incomes bracket should retain property ownership. “Property can be used as a cornerstone to build wealth, but that requires the owner to hold onto it. An income can be generated from renting the property out while equity is built up and the property appreciates in value,” explains Goslett.

According to Goslett the proposed R466 million to be spent on tourism is good for the promotion of the country and may lead to much needed foreign investment. “Tourism and foreign investment will create employment opportunities. With the growing rate of unemployment in the country, anything that creates jobs is positive for the country, the economy and the property market,” he says.

Goslett concludes by saying that the services sector was the biggest contributor to jobs during 2016 – the real estate industry is a part of this sector.

“From our point of view, there will be an immediate benefit from the increase in the Transfer Duty threshold to R900 000. This will be a huge relief not only to first-time buyers but also to many existing owners who are downscaling now from large homes to smaller ones in order to reduce their expenditure on maintenance, rates and utilities such as water and electricity. The new threshold will enable many of these buyers to use all the equity built up in their existing homes as a deposit on their new home instead of having to divert some of it to transfer duty. This in turn will mean that they are able to reduce their monthly bond instalments and use the difference to pay off debt or save more,” says Gerhard Kotze, MD of the RealNet estate agency group.

Other positive aspects of the Budget for real estate, he says, include the fact that there was neither a VAT increase nor an across-the-board increase in personal taxes and that there was no increase in the Capital Gains Tax rate which would have acted as a deterrent to property investors. “We also appreciate the renewed focus on the redevelopment and improvement of urban infrastructures including roads, water reticulation networks and public transport. If these plans can be implemented as envisaged,  it will raise living standards in our cities and towns and have major spinoffs not only in terms of property demand but in terms of tourism, enterprise development and job creation.
 
“And finally, we applaud the fact that the Minister was able in these difficult times to find an additional R600m for the social housing authority to provide affordable rental housing for poor people close to employment opportunities in the inner cities.”
 
Berry Everitt,CEO of the Chas Everitt International property says further positives for property are the significant additional Budget allocations to boost the establishment of small businesses, road and rail transport and other industrial infrastructure, facilitate wider access to broadband internet, boost tourism and redevelop and improve urban housing environments.   

“Nevertheless, most households will remain under pressure this year due to the higher cost of living and higher debt levels, and we don’t expect an immediate spike in home purchasing. As Mr Gordhan noted, it is going to take time for consumers to regain their trust and confidence in the economy and to feel the benefits of the policies laid out in today’s Budget,” he said.

“What has been increased is the withholding tax on non residents’ disposal of property from 5% to 7.5% however one would expect this to have little impact on the demand for property by non-residents,” says Herschel Jawitz says CEO of Jawitz Properties. Adding that the impact on the residential market from the budget will be mixed.  








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