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Property experts review Tito Mboweni’s 2020 Budget Speech

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Samuel Seeff, chairman of the Seeff Property Group has broadly welcomed the 2020 Budget. In particular, the raising of the transfer duty threshold to R1 million combined with the broader personal income tax relief is welcomed for the property market.

This should boost first time buyers and the low to mid-market sector to about R1.8 million which is currently the most active segment of the market, supported further by the favourable mortgage granting climate.

Seeff further welcomed the plans by the minister to lower the corporate tax rate and expressed the hope that a lowering of the Capital Gains Tax (CGT) and high end property transfer duty rates will also be looked at to reignite the property market. Especially, he adds, the upper end price bands which hold the propensity to generate significant property taxes and economic spin-off benefits.

Andrew van der Hoven, Head of Home Loans: Standard Bank Group comments:

Standard Bank is encouraged by Finance Minister Tito Mboweni’s announcement in the 2020 budget speech to adjust the property market threshold. This will enable more South Africans to participate and invest in property. Transfer duties on R1 million or less will go a long way to supporting first-time home buyers as well as those purchasing properties in the affordable end of the market. Already, this is a sector where we are seeing a lot of demand but with constraints on the supply side. It is our hope that this new stimulus into the affordable end of the market will start bringing supply-side relief into the critical sector of the economy and allow for more South Africans to benefit financially from tangible asset ownership.”

PropertyFox CEO, Crispin Inglis says that while consumer spending is still under pressure, the no transfer duties payable on property up to the value of R 1 million is great news.

Not only are individuals going to be receiving some personal income tax relief, but the no transfer duties will give many an opportunity to get a foot in the property door. Ramping up these opportunities for first-time buyers, especially, could have an important impact on a pervasively stagnant property market.”

Clifford Oosthuizen, MD of Westbrook:

“We welcome the positive news from the Minister of lifting transfer fees on properties valued at under R1 million. We hope this will reignite the property markets in Gauteng and the Western Cape which have flagged in comparison with areas that have maintained robust sales, such as the Eastern Cape”.

“We are seeing an aggressive approach from banks to give 100% loans to prospective buyers in our Westbrook estate in Port Elizabeth, in some instances they are offering up to 105% to cover the purchaser’s bond costs. Some of our buyers are even obtaining additional funding to cover investment in features like pools and patios. We’re also pleased to see a reduction in personal income tax, which would help to make these bonds more affordable, and thereby further spur the property market”.

Mike Greeff, CEO of Greeff Christies International Real Estate:

After almost a decade of weak economic performance, there is still a lot to be positive about – from the deep and liquid capital markets to being the most diversified economy on the continent – it is not all doom and gloom“.

The biggest news for the property industry is that the threshold for transfer duties has been adjusted. Property costing R1 million or less will no longer be subject to transfer duty. This is welcoming news for all because it makes buying property more. It’s also great news for those wanting to purchase for more than R1 million because you will save, for example, R17,000 in transfer fees on a R2.5 million home“.

Contrary to predictions, there will also be no increase in VAT which is welcoming to the public“.

There will be somewhat of a relief for South Africans as Personal Income Tax brackets are adjusted above the inflation rate and this means that there will be more money coming into people’s pockets“.

The Finance Minister also pointed out the growth in employment due to the Job Fund projects. To date, the project has created more than 175 000 permanent jobs for the youth and have helped 21 000 young people get into internships. This is a huge positive for the property sector because as young people become financially independent, more and more young adults will be able to qualify for home loans and in turn, become property owners and increase their personal wealth“.

On another positive note, the pilot of the Help to Buy scheme has supported over 2,000 families to buy their own homes. This is significant as the number of homeowners has increased, and it is only expected to increase further throughout the year. In a single year (2019), the Help to Buy scheme has supported nearly R1 billion in new lending therefore aiding in more South Africans being able to own their own home.

Dr Andrew Golding, chief executive of the Pam Golding Property Group says that its good news for the property market is the adjustment of the threshold for transfer duty with zero duty payable on property costing R1 million or less.

Encouragingly, one of the primary beneficiaries of the 2020 Budget is first-time home owners. And one of the key positives for the local housing market is the demographic dividend of a young population – with approximately two-thirds of the current population under the age of the average first-time buyer (34 years, according to ooba).”

While first-time buyers currently account for approximately half of all mortgages currently facilitated by ooba, affordability has tended to dampen potential demand. The 2020 Budget goes some way towards addressing this, by lifting the transfer threshold from R900 000 to R1 million. This is given that the average price paid for a home by a first-time buyer broke the R1 million barrier for the first time ever at the beginning of the year – at R1 001 275 in January 2020“.

The increase in the transfer duty threshold provides a very positive incentive not only for first-time home buyers but also others seeking affordably priced homes – a sector which represents a key driver in the current market. It will help stimulate property transactions in this price band, increasing volumes and creating a ripple effect across the market in general – which will in turn benefit government income generation.”

“It is also pleasing to see that the Help to Buy scheme has assisted over 2 000 families to buy their own homes.”

Carl Coetzee, CEO of BetterBond believes that the Budget speech bodes well for the property sector, particularly the commitment to supporting the property market by adjusting the threshold for transfer duties. 

Transfer duty will no longer apply to properties that cost R1 million or less, which significantly reduces the financial burden on those looking to enter the market. It’s encouraging for the economy at large too, as property investment serves as an important barometer for the fiscal health of a country“. 

The success of the pilot phase of the government’s Help to Buy scheme is encouraging too. To date, the initiative has supported more than 2000 families to buy their own homes, amounting to some R1 billion in new lending in a single year.” 

All in all, we are encouraged by this year’s Budget Speech, as it addresses the major issues hampering our economic growth and development. Furthermore, the reassurance that the relevant “officials will find ways to use the allocations made through the Municipal Infrastructure Grant to ensure that municipalities not only build new infrastructure but also maintain the infrastructure they already have” is good news too. We welcome the plan to penalise the municipalities that haven’t implemented measures to deal with corruption at municipal level, as well as the news that municipalities in good standing will be able to buy electricity from independent power producers very soon as this is very positive for homeowners.”

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that some of the interesting announcements made during the Budget Speech will have a positive impact on the local property market.

Though there is still a lot to be done, there were some positive outcomes in this year’s budget speech. To start, properties under R1 million are now exempt from transfer duties. To date, this exemption only applied to properties under R900,000. Though this is not a huge adjustment to the tax-free threshold, it will still help make it easier for many to purchase entry-level homes.”

The second positive announcement that Goslett notes is the confirmation that Government will soon allow those municipalities that can afford it the opportunity to purchase electricity from the private sector. This will alleviate pressure on the national grid and reduce the risk and frequency of load shedding which, Goslett notes, bodes well for both the property market and the country as a whole.

Minister of Finance, Tito Titus Mboweni, also made mention of the development of smart cities referred to by the President in the SONA. He earmarked Lanseria as a potential area in which to develop this smart city. Cape Town was said to follow shortly thereafter. “This could drive up demand in these areas, especially once evidence of these promises start to materialize,” Goslett predicts.

All in all, Goslett says that the local property market stands to benefit from some of the announcements made in this year’s budget speech. Though more could be done, Goslett remains hopeful that the new policies outlined in this speech will nevertheless help towards addressing the many fiscal problems our nation faces.    

Joff van Reenen, Director of High Street Auctions, says both the personal tax relief and the adjusting of the property transfer duty threshold exemption to R1 million are good news for the property sector.

Eskom remains this country’s gravest concern and our greatest threat to economic growth and stability. South Africa’s medium-term growth forecast is dismal compared to the rest of Africa and much of that is due to our dire power situation.

The government no longer has a choice. Getting the power utility right isn’t optional; it’s the pivot on which our success or failure will depend.”

Van Reenen says R230 billion over ten years to achieve the restructuring of the electricity sector is a hefty price to pay, but if it works it’ll be worth the spend.

The bottom line is we’re in a tough spot. Our economy is flat, we’re spending too much, earning too little and as much as the Minister clearly tried to make a silk purse from a pig’s ear, I doubt it’ll be enough stave off a downgrade from Moody’s.

It wasn’t a great budget, but no budget could be good in this economy. It’s up to the private sector to keep the money flowing this year; that much is clear.

Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, says there was much to welcome in this year’s budget speech, including substantial efforts to curb the bloated public service wage bill, tax relief for citizens and no increases to corporate tax.

There were positive announcements across the board. The Minister had little to work with, but it’s encouraging all the same to hear announcements of initiatives such as an Innovation Fund that will be capitalised with R1.2 billion over the next three years, industrial business incentives worth R18.5 billion to create and retain approximately 56 500 jobs, an additional R107 million reprioritised for the refurbishment of 27 industrial parks in townships and rural economies and an allocation of R6.5 billion for small business incentive programmes“.

Since so much of the country’s economic growth lies in the private sector it’s also encouraging to see steps being taken to address South Africa’s lagging productivity growth and reduce the cost of doing business like the BIZPortal to streamline registration of new businesses with the CIPC, SARS, the UIF and the Compensation Fund in one day“.

Needless to say from a property perspective, we also welcome the shifting of the transfer duty threshold to R1 million.”

Geffen says it wasn’t an easy budget, but the Minister did well with the small number of tools he had at his disposal.

Herschel Jawitz, CEO of Jawitz Properties, believes that from a consumer point of view the 2020 Budget is significantly better than that of 2019, especially against what was expected.

Given the budget deficit and the revenue challenges, an increase in VAT and virtually no increase in the personal income tax thresholds were expected, which would have hit consumers hard. This turned out not to be the case. Other than the usual increases in sin taxes and a less than expected increase in the fuel levy, consumers are going to get more tax relief than they got last year, with above inflation increases in the PIT thresholds. This, together with the recent interest rate cut, could lay the foundation for a shift in consumer confidence, which is key to the recovery in the residential property market“.

The increase in the transfer threshold to R1 million is once again not a significant increase but definitely more than expected. At the lower end of the market, an extra R3,000 saving will add to the buying opportunities in the current market already supported by favourable bank lending and property prices offering excellent value. Consumers didn’t carry the burden of this budget and that’s good news for consumer confidence. The real burden for the current budget is carried by the government and their ability to fix the SOEs and reduce a bloated and inefficient public sector“.

Bondspark CEO, Marcél du Toit, says that the announcement at the 2020 Budget Speech regarding the adjustment of the transfer duties threshold, is welcome news for the struggling sector.

With properties under the R1 million no longer subject to transfer duty, Du Toit says that this affirms the company’s view that there is a lot of activity within this market segment: “This was a very positive decision and we believe that this was a smart move from the Finance Minister and will help to further stimulate the economy while providing much-needed relief for homeowners in this price bracket.”

Du Toit says Bondspark, is excited to see the impact of the budget speech over the next six months. He is confident that South Africa’s property market will recover within the next year: “It is important to see the National Treasury support the property sector. Affordability has long been an issue within the sector, and the changes have addressed this directly. This will, in turn, improve consumer confidence, which was at an all-time low.”

In addressing affordability, Du Toit says that they also expect more prospective buyers to qualify for the home loans they need: “This will again increase confidence and add much-needed impetus to the property sector. With the competition among banks also on the rise, we can only see the consumer benefiting over the next fiscal period, which makes for a great change and bring much-needed upswing locally.”

Tholo Makhaola, President of SAIBPP:

The South African Institute of Black Property Practitioners applauds Minister Mboweni and the National Treasury team for delivering a sober budget which acknowledges many of the pressing economic challenges and pressures faced by taxpayers and citizens alike while acknowledging the need for long term financial planning“. 

In the budget speech, there are several key areas which we have noted:

In terms of economic growth, we welcome the tax relief initiatives that have been afforded to individuals.  

Regarding bail outs afforded to SOE’s, we note that these are some of the largest owners of immovable property and land which is in many cases under-utilised and not leveraged to generate revenue. We call for the urgent release of underutilized prime land for development via mechanisms such as lease & development PPPs with the private sector. Catalyzing property development and infrastructure development is one of the many ways in which government can ensure that the desired developmental objectives of transformation and growth are achieved“. 

“On land reform, it was noted in our previous response to the 2020 SONA made by the President that, while important, the disproportional emphasis on land use for agricultural purposes must be addressed.  Land must be released for property development in order to drive investment and transformation which can be achieved by having a focus on the release of this land to black developers that are able to present commercially viable and bankable developments.”  

On access to funding, we support the increased budget allocation towards SMME development and the increased capitalisation of SMME focused development finance institutions such as SEFA. Although there remains much to be done to support and drive procurement from and growth of SMMEs, this will go a long way in driving the growth of black businesses“. 

We also welcome the allocations made for education both in the feasibility studies for the establishment of a new university as well as to the continuing program of the eradication of schools made out of inappropriate materials“. 

“As referenced in our response to the President’s SONA, the formation of the State bank & consolidation of DFIs is welcomed however we feel that the state bank should have a developmental mandate and cannot function purely as a profit-making retail bank. In this instance, we want to know what the developmental mandate will be and how this will be balanced with the credit act. We do not need ANOTHER retail bank that will subject our people to discriminatory lending rights and requirements that are impossible to meet. This bank must be developmental in nature and serve the needs of the previously marginalized“.  

Furthermore, the continued silence on the status of the Human Settlements Development Bank continues to be a concern. How will this now be affected by the announcement of the state bank? What is the status of the formation of the HSDB?

“Regarding ownership, we note the increased threshold for transfer duties which will assist in making home ownership more accessible, we are concerned however that other costs related to home ownership are still very prohibitive such as bond registration costs, attorneys fees etc. which we have seen as the biggest barriers to entry in this endeavor”.

First time home-owners subsidy needs to be more robust, in the 2019 budget, the Minister disclosed the allocation to be R950m over 3 years, given the dire housing backlog that we are faced with and the growing youth population, this will hardly be enough“. 

On urban spatial integration, we welcome the prioritization of local economic development.  It is indeed true that local government is the heartbeat of any state / economy however, investment must be channeled towards townships and inner-city development where most of our people live. This can be achieved through a focus on local government support as well as Infrastructure investment and developmental which has an impact in bettering the lives of our people. We do however note the allocation that has been made for the refurbishment of 27 industrial parks in townships and rural economies which we feel will assist in the upliftment of our townships“. 

The current economic challenges are not insurmountable, implementation is key.  The members of SAIBPP look forward to engaging with national and local government to assist with providing intellectual and physical capacity in making the implementation of these plans a reality“.