The residential property sector in South Africa, although beleaguered by all the factors that make life difficult for potential homeowners (unemployment, reduced incomes and fairly stringent loan criteria), will on the whole benefit from the latest budget, says John Smyth, CEO of the bond originators Multi-NET Mortgages.
“I believe that residential property will benefit from this latest budget, firstly, because, although many of us had expected every possible tax source to be exploited, Pravin Gordhan has increased property transfer duties only on those properties with a value of more than R10 million”.
“The transfer duty exemption previously granted to properties below R750 000 is significant and it is good to see that this will remain in place. This category now accounts for an ever increasing percentage of all home sales in South Africa so this tax relief is an important concession.”
In addition, says Smyth, residential property developers and marketers will benefit from the renewed confidence given by the latest budget.
“Both locally and internationally,” he says, “the budget has been seen as a declaration by South Africa that it is committed to sound fiscal administration and will do everything it can to stave off relegation to
a junk status credit rating. This is seen as responsible action.”
Throughout the business world, adds Smyth, it is recognised that very few South African Finance Ministers have ever been faced with so difficult a task as was Pravin Gordhan on this occasion.
“The challenges the Minister faced have been clearly summarised by Jacques du Toit of ABSA and others: they include the lowest commodity prices in living memory, volatile financial markets, low global and low local economic growth, severe unemployment, the drought, power supply shortages, rising inflation and interest rates, recalcitrant trade unions and low levels of business confidence. All these factors have resulted in unfavourable trade balances and excessive foreign debt”.
“Nevertheless, despite these difficulties, Gordhan has managed to produce a budget in which we are told expenditure will be cut by R1.463 billion and the national deficit will be reduced to 2,4% of GDP by 2018/2019. Furthermore, this is being done on the whole without raising income taxes (so far), although this might have seemed inevitable in the current circumstances.”
Those like Multi-NET Mortgage staff serving the property sector, says Smyth, are increasingly aware that the desire to own a home is growing stronger among South Africans especially those who, very often for the first time in South Africa’s history, are emerging from hand-to-mouth unreliable occupations into more secure and steady employment. The willingness to invest in property, he adds, also appears to be growing among the more affluent South Africans, who more and more see it as an inflation hedge.
“The outlook for the residential sector, therefore,” says Smyth, “is not wholly unsatisfactory. No booms are predicted within the next 18 to 24 months, but we can look forward to a steady flow of sales where the service is good and where people meet the loan criteria.”
