Budget Speech’s Impact on the Property Market
*Image sourced from EWN
Finance Minister, Tito Mboweni presented a “positive budget” under challenging circumstances, perhaps the most challenging over the last twenty-seven years, says Samuel Seeff, chairman of the Seeff Property Group.
“We are delighted that instead of facing tax hikes, Treasury is providing tax relief in the form of a 5% adjustment in the personal income tax brackets which should bring relief for low to middle-income earners especially, says Seeff.
A missed opportunity is perhaps that transfer duty, including the R1 million exemption threshold remains unchanged. 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.
Despite there being no announcements that directly affect the local property market, the National Budget Speech for 2021 will have an indirect impact on the local real estate market over the course of this year.
“The property market is indirectly affected by the overall performance of the economy. Leading up to the speech, I, therefore, remained hopeful that the budget will be allocated wisely and in such a way as to facilitate job creation and economic recovery. While some of what was promised can help towards stimulating growth, thereby positively impacting the local property market, other decisions fell short and are unlikely to achieve their desired outcomes,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
For example, Goslett says that the increasing of the personal income tax brackets/thresholds will help lower- to middle-income earners which will hopefully provide access to greater disposable income. However, the lowering of the corporate tax rate to 27% is unlikely to stimulate reinvestment or employment as 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 to medium enterprise owners,” he comments.
Seeff adds that while Capital Gains Tax and VAT remains unchanged, consumers and household budgets will need to absorb increases such as the 15.63% electricity hike from the 1st of April along with a 26c per litre increase in the fuel levy which will affect their cost of living and eat into household budgets and will offset some of the personal tax savings provided.
Goslett is also unconvinced by the growth forecast predicted in this 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,” he suggests.
“With the massive tax shortfall for 2020 and the enormous debt that SA will have to service going forward, there is not much room for stimulation. While I am glad to hear that there are no further bailouts for other state-owned enterprises, we are still paying for the sins of wasteful expenditure and corruption in prior years. It would have been tough without that waste. Now it is a mountain to climb,” he concludes.