National Budget geared to instill confidence

Given the hand they were dealt, government has performed a delicate balancing act which it is hoped will serve to reignite confidence in investment in South Africa, regain our global credibility and satisfy the credit ratings agencies, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

“Speaking from a property perspective, this is a market which is fuelled by sentiment, and as a consequence, a Budget which satisfies the above criteria – on the back of the election of President Ramaphosa – is expected to go a long way towards reaffirming investor confidence in real estate.

“South Africans continue to demonstrate an increasing appetite for home ownership which is to be encouraged as it helps provide security of tenure and financial security for the future.”

Dr Golding says an interesting aspect of the Budget Speech is the proposal that some 195 000 government-owned properties,  with an estimated value of over R40bn, would either be better used or sold in the short to medium term, which could unlock revenue as well as opportunities for property development and redevelopment.

“And while we await further detail, the commitment to drive both urban and township development and stimulate faster and more inclusive growth augurs well for infrastructural investment and the facilitation and expansion of economic hubs, especially along key transport corridors.

“Also positive is the allocation of R6 billion for purposes which include drought relief and to augment public infrastructure investment.”

Adds Dr Golding: “While the increase in VAT from 14% to 15% is unpalatable and erodes consumer disposable income – particularly among lower income earners, it was anticipated and is hoped will go a long way towards offsetting the Budget deficit. Welcome news for lower and middle-income earners is the adjustment of the bottom three personal income tax brackets for inflation.

“It is true however that the 52c a litre increase in levies on fuel will impact across the economy, as rising transport costs have an inflationary, ripple effect.

“While growth forecasts for our economy appear increasingly positive, it will become evident in the coming days and weeks as to how the credit ratings agencies will respond to the Budget.”

Meanwhile Herschel Jawitz also shared his views on the National Budget and what to expect in the residential property market

"The National Budget is as expected, with a focus on reducing the deficit, giving marginal relief to those who need it most, and continuing to directly, or indirectly place a greater tax burden on the wealthy. With an increase in VAT by 1% and the increased fuel levy, together with all of the other increases such as sin taxes, almost all South Africans will have less real disposable income on March 1 2018, than they do today. This is a very tight budget.

Economic growth remains low at a projected 1.5% for 2018, and there is still a lot of work to be done to fix the damage caused by ex-President Zuma and his administration. Details on the SOEs and how government proposes to fix them were particularly vague. Jawitz Properties welcomes the comments on the Integrated Urban Development Framework to improve the quality and productivity of our urban areas, which will play an important role in preserving and improving infrastructure in these areas, as well as enhancing property values. The key will be the implementation of these initiatives.

From a residential property point of view, there are no changes to transfer duty, the capital gains tax exemption on a primary home or the effective tax rates for capital gains. The government has got little or no room to move, and with property price growth and the volume of sales at current levels, there was no expectation that transfer duty thresholds would be increased. The estate duty on estates above R30 million has been increased, which may impact on the luxury end of the market once again.

While the budget provides no financial impetus for the recovery of the residential market, the key factor of renewed consumer confidence will help to improve property prices and demand in 2018."

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