Budget 2021 ’could make or break’ SA’s residential property sector
The property industry is hoping that Finance Minister Tito Mboweni will outline some solid plans to address unemployment in his 2021 Budget Speech on Wednesday.
This is because job growth will be the key to maintaining the current momentum in the property market, says Tony Clarke, managing director of the Rawson Property Group.
Without it, consumers will lose the confidence to buy property, even if they can afford it. In this sense, the budget plans “could make or break” the country’s residential property sector this year.
“The minister is going to have to make some decisive moves to attract and keep more investment from private businesses and individuals so that it can begin to speed up economic growth and hopefully make a meaningful dent in the unemployment rate.”
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Vuyiswa Mutshekwane, chief executive of the South African Institute of Black Property Practitioners (SAIBPP), says unemployment continues to rise at an “alarming rate” and that entrepreneurs and SMMEs “who are the life-blood of this economy” should therefore “be funded and capacitated with urgency”.
“Development Finance Institutions (DFIs) need to be capitalised accordingly and additional funding needs to be allocate towards the relevant DFIs to achieve this.”
Wednesday’s Budget must also prioritise increased infrastructure spending to boost GDP growth and stimulate the economy, she says, adding: “Housing and housing development continues to be a top priority and we expect to see an increased allocation towards the provision of decent housing for lower income South Africans. A consolidation of the funding currently allocated towards various housing agencies and the establishment of the long-awaited Human Settlements Development bank should be underway and we expect to see an allocation towards to the capitalization of this institution within this year’s budget.”
Clarke says Mboweni is also expected to make “some tough calls” to cut public sector expenditure and raise revenue.
Property buyers should therefore not expect transfer duty relief when purchasing property this year, says Herschel Jawitz, chief executive of Jawitz Properties. Despite better than expected revenue collections, the impact of the Covid-19 pandemic on the economy and the budget deficit “remains a key challenge for the government”.
“The transfer duty threshold was increased to R1 million last year and with property prices in real terms barely keeping up with inflation over the last year, it is unlikely that this threshold will be increased any further...
“Even though there has been a meaningful increase in sales since July 2020, much of the activity has been from first-time buyers so Sars will not have seen a significant increase (in revenue from) transfer duty.”
He adds that the Capital Gains Tax exemption will remain at R2 million for a primary residence.
While Adrian Goslett, chief executive of Re/Max of Southern Africa, expects transfer duties and capital gains tax to stay the same, he is hoping that the budget will be wisely allocated and in such a way as to facilitate job creation and economic recovery.
“The property market is indirectly affected by the overall performance of the economy.”
Meanwhile, Women in Planning SA (WiPSA) is hoping Mboweni will put more emphasis on the green economy. Founding director and chairperson Gugu Sithole-Ngobese says the promotion of a green economy will be beneficial to the country and its people. This is because the five principles of such an economy are:
Wellbeing: A green economy enables all people to create and enjoy prosperity
Justice: A green economy promotes equity within and between generations
Planetary boundaries: The green economy safeguards, restores and invests in nature
Efficiency and sufficiency: The green economy is geared to support sustainable consumption as well as sustainable production
Good governance: The green economy is guided by integrated, accountable and resilient institutions.
She notes that it is “reassuring” that government has had a strong policy framework for the promotion of a green economy since 2011.
“From an economic perspective, if the production costs of doing business are reduced through the reduction of energy then substantial savings are possible to generate economic growth.”