Advice and Opinion

Residential property sector welcomes latest budget as "far better than expected"

The general opinion in South Africa’s residential property is that Finance Minister Pravin Gordhan’s 2013/2014 budget is “far better than many expected” and is likely to help the economy – and therefore the property sector – move forward into a new growth phase, says Bill Rawson, Chairman of the Rawson Property Group.

Towards the end of last year, Rawson expressed “a very real fear” that a growing national debt could result in South Africa’s rating by the international agencies dropping still further – with disastrous consequences – so Gordhan’s prediction that the deficit will this year actually come down by 0,2% to 4% of GDP (with a further reduction to 2,6% of GDP by 2016/2017) will give considerable reassurance to those who feared South Africa’s debt might be running out of control.

“This single statement by the Minister,” said Rawson, “will go quite a long way to restoring investment confidence.”

Also welcome news to South Africa’s financial (and property) communities is that South Africa’s tax collection once again appears to have been exceptionally efficient, bringing in more than anticipated – for the first time since the recession the corporate revenues will exceed the 2008/2009 peak of R1,65 billion.

Other welcome news, said Rawson, is that personal income tax will be given a relief package of R9,25 billion, industrial development and small and medium enterprises will be given tax incentives or support and, perhaps most importantly, public infrastructure development, including local authority water sanitation and energy services, will now be allocated R847 billion over the next three years — a figure which is, though still too low, a step in the right direction.

“While all these matters may seem to be divorced from the property sector,” said Rawson, “all of our experience goes to show that in small ways they do affect us — infrastructure developments in particular have a boosting effect on the property sector.”

Reverting to a topic on which he has more than once commented previously, i.e. household debt, Rawson said that, by and large, this is still excessive for an emerging country like South Africa, particularly, but by no means exclusively, among the previously disadvantaged people now earning far more than their predecessors. This has been a prime reason for so many South Africans continuing to be tenants and not home owners – to the detriment of the residential housing sector.

“It is, therefore, of great interest to us to learn that the cabinet has approved measures to help debt-ridden households to reduce their debt. Many good estate agents and bond originators have continued over the years to play an important part in helping financially unsophisticated people reduce their debt and move onto the home owing ladder. It will be interesting to know how the state will be able to help in this matter.”

While it is inevitable, said Rawson, that social grants have to be very high in a country like South Africa, as a result of the “minimal” educational expenditure in the past, the R410 billion allocated here is “a big sum to find”. Furthermore, he said, it has to be admitted that many South Africans, while approving of the growing expenditure on the educational budget, believe that it is time this expenditure produced better results.

“The impression that some of us are getting is that a lack good role models in this sector,” said Rawson, “has resulted in a grossly misplaced complacency among both administrators and staff. It is time that this department was jacked up.”

Summing up, Rawson said that while the admiration many people feel for the way in which Gordhan has “pulled the cat out of the bag”, a very big question mark now hangs here as to whether the government will be able to deliver as promised.

“Let’s hope they can,” said Rawson, “because the future as outlined by Minister Gordhan is promising and we in the property sector would welcome a return to a more buoyant economy.”

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