JOHANNESBURG - An improvement in the residential property market was expected this year, despite the Budget being negative for the housing market, according to industry analysts.
Jacques du Toit, a property analyst at Absa Home Loans, said yesterday that the Budget would definitely impact on consumer and household finances by affecting disposable income.
He said this flowed from the 1percentage point increase in VAT to 15 percent, the tax brackets not being adjusted properly to account for bracket creep caused by inflation, the overall 52c/litre increase in the fuel price and other tax hikes.
“Consumers will have less money in their pockets to repay debt and take up further debt,” Du Toit added.
He said it remained to be seen how this would affect consumer confidence, which was still very low, with the consumer remaining relatively cautious.
However, he stressed that “everything was not lost” for the property market. Du Toit said inflation dropped to 4.4percent in January, which was below the mid-point of the SA Reserve Bank’s monetary policy committee's 4 percent to 6percent inflation target range, which “bodes well for the outlook for interest rates”.
He said even a 25 basis point cut in interest rates, which would not make a big difference to monthly repayments, would have a psychological influence on home buyers, boosting confidence and leading to an uptick in house prices.
John Loos, a household and property sector strategist at FNB, said the budget would take “a big slice” out of the disposable income of consumers and was negative for the residential property market.
However, he expected the housing market to be a little more resilient this year.
Loos said sentiment had improved following the leadership changes in the ANC and the country was “in a more positive place”, which had helped improve consumer confidence.
Pam Golding chief executive Andrew Golding said an interesting aspect in the Budget was the proposal that 195000 government-owned properties, with an estimated value of more than R40billion, would either be better used or sold in the short to medium term. Golding said this could unlock revenue as well as opportunities for property development.
Berry Everitt, the chief executive of Chas Everitt, said the commitment to reshape the public service and cut government spending by about R85bn would hopefully stave off a ratings downgrade to total junk, help attract more private sector investment and boost the employment rate.
“More jobs will mean more property sales and rentals and could even mean some interest rate cuts this year."