Too little, say property experts

BY BONNY FOURIE bronwyn.fourie@inl.co.za

PICTURE: JEAN VAN DER MEULEN/PIXABAY

While some initiatives were welcomed many believe there was room in the Budget to offer transfer duty relief and other boosts for property

THE PROPERTY industry was left somewhat disappointed by this week’s Budget speech which it had hoped would outline decisive plans to boost employment and stimulate economic growth.

Both these issues hold powerful, although indirect, repercussions for the industry, and although some parts of the plans have been commended by property experts, others fall short.

The increasing of the personal income tax threshold, for example, will help lower- to middle-income earners access greater disposable income – which could encourage property ownership – but Adrian Goslett, chief executive of Re/Max of Southern Africa says the lowering of the corporate tax rate to 27% is unlikely to stimulate reinvestment or employment.

“It is not an aggressive enough stance. I would also have liked to have seen more creativity around possible support or tax breaks for entrepreneurs and/or small-tomedium-enterprise owners.”

He is also unconvinced by the growth forecast predicted by Finance Minister Tito Mboweni in his speech. “In previous years, there have been promises of a 3.3% growth but we have not hit that target for years.

“There is much ground to make up for the lack of growth over the previous years and, based on the lack of available revenue to invest, it seems unlikely that we will see that growth rate happening in the year ahead,” says Goslett.

One of the “surprising upsides” to this year’s Budget was the above-inflationary increase in the personal income tax brackets, says Herschel Jawitz, chief executive of Jawitz Properties.

This, in conjunction with a sustained low interest rate environment will provide additional relief to consumers and homeowners.

“The financial impact may not directly impact on residential demand or prices but it may lift consumer confidence just a bit, which is a key driver for the residential market. Similarly, the proposed reduction in corporate taxes may help to stop the slide in business confidence, which is critical to get businesses to spend and the economy to grow.”

Echoing Goslett, Jawitz says the numbers around economic growth are “concerning”.

“Predicted GDP growths of 2.2% in 2022 and 1.6% in 2023 are simply not going to do the job. For property prices to grow in real terms, demand will have to exceed supply on a consistent basis. This will only be reflected when more people earn more money and that’s about economic growth.”

From a real-estate perspective, Berry Everitt, chief executive of the Chas Everitt International Property Group says the most important single item in the Budget is the R10 billion allocation for the purchase and distribution of Covid-19 vaccines. These need to be administered as fast and efficiently as possible if the country hopes to achieve “any real measure of economic recovery” in the next 12 months.

“Property and construction and all the downstream sectors are, of course, vital to the economy as significant job creators but we also need people to have jobs in order to keep purchasing and investing in real estate,” he says.

“And that is not going to happen unless major private investors, foreign and local, have enough confidence in South Africa’s post-Covid economic stability to put their money into the major Public- Private Partnership projects envisaged by the minister and the president in his recent State of the Nation Address.”

For this reason, he feels that the government needs to “urgently” provide more clarity and detail on its plans for failing state-owned enterprises (SOEs), proposed expropriation of land without compensation legislation and the threeyear public sector wage agreement that is currently being negotiated.

Yael Geffen, chief executive of Lew Geffen Sotheby’s International Realty, is not convinced the Budget offers any real economic solutions as, on one hand, the government is giving tax breaks to lowerincome households but, on the other, is heftily raising the fuel levy which will force increases in in the cost of living.

Similarly, she says Mboweni expressed strong views on the need to cut the country’s massively bloated public wage bill but ploughed R12.6bn into the creation of short-term jobs that offer no long-term benefit to the economy.

“In fact, all they do is temporarily skew the official unemployment statistics in the government’s favour, give foreign investors and ratings agencies a false picture of the economic stability of the country and offer no long-term benefit to the citizens on the ground who really need sustainable jobs.”

From a real estate point of view, Gerhard Kotzé, managing director of the RealNet estate agency group says the country will only be able to sustain or grow the current level of activity in the market if there is significant economic recovery and job creation within the next 12 to 18 months – and that can only happen if South Africa rolls out vaccines and achieves “herd immunity” in tandem with its main trading partners around the world.

“Consequently, we are very pleased with the Budget commitment to spend at least R10.2bn on the purchase and distribution of vaccines over the next two years – although we remain concerned about the lack of detail from government as regards the actual roll out timetable.”

He adds: “It was disappointing, though, that Treasury found no money to support homeownership by reducing property transfer duty – although it did make a R7bn allocation to bail out the Land Bank once again.

Samuel Seeff, chairman of the Seeff Property Group, welcomes the focus on economic recovery, relief for households, vaccination and the various reforms proposed, including in corporate tax, the public sector wage bill and SOEs. However he says not increasing the transfer duty exemption on residential property is a “missed opportunity”.

“Some relief here, especially at the higher end where transfer duty was increased three years ago, could have gone a long way in driving higher sales in the property market and, in turn, higher transfer duty revenue and economic contribution,” Seeff says.

The significant focus on job creation, with an overall allocation of nearly R100bn, including an infrastructure budget and short-term job creation initiatives, is a “positive”, he says. “The increases in pensions and social grants are also welcome news for the economy.”

Given that the latest inflation rate of 3.2% as at January is still well within the Reserve Bank’s target range, Seeff says the outlook for the interest rate remains positive and property buyers can still take advantage of the five-decade low borrowing costs.