Most economists and other expert commentators seem pleased with today’s Budget, and so they should be, says Berry Everitt, MD of the Chas Everitt International property group, because it represents a remarkable balancing act.
“Finance Minister Pravin Gordhan and his team have essentially managed to walk the fine line between the urgent need to reduce the budget deficit and convince the international rating agencies that the economy is under control and the equally urgent need to find more money to fix some urgent internal problems and stave off recession without raising taxes too much and burdening already stretched consumers”.
“Indeed, it is a very inclusive Budget designed to give everyone renewed hope in the economy as a whole and a brighter future for South Africans individually, and we hope that the vision it contains really can be translated into action and implementation.”
Especially encouraging aspects from the point of view of the property industry, he says, are:
*The commitment to contain the budget deficit to 3,5% of GDP, which will hopefully enable SA to keep its investment grade credit rating. “This will boost confidence of in the economy, and that is the foundation of a healthy real estate market.”
*The renewed focus on education, health and small business support in order to create a more highly skilled workforce and enable faster job creation and higher home ownership levels.
*The large allocations to municipalities to enable them to create and maintain better living environments and expand the use of public rapid transport networks, especially in the large metros where such a large percentage of the population now lives.
*The attention to wastage and overspending in government and determination to cut unnecessary posts, increase budget oversight and slash expenditure in order to reallocate money to meet urgent needs such as drought relief and outstanding university fees. “These measures will bring relief to many households that are currently struggling to meet their financial commitments, as will the income tax relief announced for lower and medium-income earners.”
*The fact that there was no VAT increase, as this could have been very damaging to lower income households at this stage and put them out of the running for home ownership for many years.
Everitt says the increases in Capital Gains Tax, Transfer Duty on luxury property and the fuel levy, as well as the introduction of a new tyre tax are obviously much less welcome and will need to be closely monitored in the next few months to see what effect they have on high end property investment and the ability of middle-income households to qualify for new home loans.
“Overall, however, we expect the Budget to have a positive effect on the property market in terms of sustaining housing demand over the next 12 months.”