Advice and Opinion

BetterLife Home Loans comments on SA's 2016 National Budget Speech

The priority today for Finance Minister Pravin Gordhan was to do everything possible to avoid SA’s credit ratings being downgraded to junk status – and this Budget was certainly an admirable attempt to do just that, says Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest mortgage originator.

“At the macro-economic level, it is structured to contain the all-important national budget deficit to 3,2% of GPD, which is higher than the 2,6% that was predicted for this year but down from last year’s 3,8% and shows that the country is going in the right direction as regards reducing expenditure in regard to revenue”.

“It also honestly addresses the concerns of investors and ratings agencies about public sector corruption and wastage and puts in place many measures to cut government spending on the ‘wrong things’, while also addressing the urgent need for economic growth and job creation by making huge fund allocations to infrastructure development, urban transport projects, education and various business support mechanisms”.

“Consequently, we believe it will prove to be the confidence-booster so critical to SA’s economic future.”

However, he says, there were disappointments in the detail for the residential property market, which essentially relies on consumers having sufficient discretionary income to buy new homes as well as more confidence that the country is “going in the right direction”.

These include the increases in Capital Gains Tax and the Transfer Duty on luxury properties costing more than R10m, as well as the limited fiscal drag relief that has been applied to personal income tax. “On top of that, the increase in the fuel levy, the introduction of a new tax on tyres and higher levies on various commodities are bound to increase food costs further at a time when they are already high due to the drought, and when many households are battling to deal with higher interest rates on existing debts.”

“This will of course limit the ability of those households to qualify for home loans and buy their own homes in the coming months, and we expect a slowdown in first-time buying as a result – unless and until the economy starts to turn around as Mr Gordhan has envisaged, and employment numbers start to rise.”