The property industry has been left somewhat disappointed by this afternoon’s Budget Speech which it had hoped would outline decisive plans to boost employment and stimulate economic growth. Picture: Simphiwe Mbokazi / African News Agency / ANA
The property industry has been left somewhat disappointed by this afternoon’s Budget Speech which it had hoped would outline decisive plans to boost employment and stimulate economic growth. Picture: Simphiwe Mbokazi / African News Agency / ANA

Budget 2021: Property industry disappointed, says Tito Mboweni could have done more

By Bonny Fourie Time of article published Feb 24, 2021

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Durban - The property industry has been left somewhat disappointed by this afternoon’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 incomes – 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-to-medium-enterprise owners.”

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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.”

While Herschel Jawitz, chief executive of Jawitz Properties, says the 2021 Budget offered “some surprising upsides”– such as the personal income tax relief, he believes there was room to offer increased transfer duty relief on residential properties. The transfer duty exemption threshold will remain at R1 million while Capital Gains Tax is also unchanged.

“Income from property taxes was expected to be flat from last year, but it is expected to grow by R1.4 billion to R16.8 billion in the 2021/22 year. The numbers relative to the overall budget are small and perhaps more residential transfer duty relief would be more than offset by increases in home ownership.”

The above-inflationary increase in the personal income tax brackets in conjunction with a sustained low interest rate environment will, however, provide additional relief to consumers and homeowners, he says.

“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 R10billion 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. 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 three-year public sector wage agreement that is currently being negotiated.

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

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. But 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.”

The significant focus on job creation, with an overall allocation of nearly R100billion, including an infrastructure budget short-term job creation initiatives, is a “positive”, he says.

“The increases in the 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.

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