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File Image: IOL

How #Budget2019 will impact the commercial property sector

By John Jack, Time of article published Feb 21, 2019

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Finance Minister Tito Mboweni was always going to have a difficult time trying to please everyone during the delivery of today’s 2019 budget speech.

Thuma Mina has come through quite clearly. Government is urging the country to pay its bills and to play nice on the promise that they will root out corruption and appropriate spending where it will drive growth and education.

It may have been a difficult speech to digest for many, but I believe there are numerous positives that have come out of it for the property sector, particularly for the commercial property industry.

Relaxing visa requirements

Relaxing Visa requirements attracts tourism which drives the retail and hospitality industries. There are rumours that a global holiday resort is eying out South Africa for a site as well as many other entrants into SA who will source and build new hotels. This has numerous positive knock-on effects for the commercial property sector, not to mention extensive job creation.

Welcoming and boosting the technology sector

Welcoming the technology sector is an interesting one given that South African wages are generally lower than those in Europe. South Africa does have the advantage as an outsourced technology partner though when it comes to software development, particularly for Europe as we are in a similar time zone, English speaking and having built a reputation for high quality work. Poland as an example saw a significant increase in demand for property as a result of the need to serve the global market, particularly due to the large amount of students that were attracted and the subsequent increase in student accommodation. We could expect the same outcome if the powers that be back the comments made in today’s budget speech.

Allocating R19,8bn for industrial incentives

Incentives not only boost the industrial sector but will create demand for new space and the take-up of existing facilities, ultimately reducing the supply of property available and driving up values for property owners. The first step, however, is overcoming the electricity supply problems.

Rapid urbanisation

Rapid urbanisation requires us to build up and densify cities which will demand investment in infrastructure and transport solutions. This pushes up demand for retail and related services to accommodate the influx of people to the cities. As parking and accommodation supply gets taken up, prices rise as we have seen in the Cape Town market.

Attracting highly skilled people to SA

The attraction of highly skilled people to South Africa means the expansion of business and perhaps even the creation of new business or related industry to support the same. This again drives the demand for property in South Africa. 

It was interesting to hear the statement focused on streamlining the law to make it easier to build and allocating significant budget toward infrastructure projects. This was a bit of a vague statement in my opinion and so it will be interesting to watch how this develops.

We will also need to watch how the rating agencies respond to the 2019 budget speech. Many may wait until after the elections to make their decisions though. Whatever they decide will impact almost all industries in South Africa.

The overrider in all of this is getting the Eskom situation sorted out to support the demand and to improve business confidence so as to attract investment across all industries. Everyone needs to pitch in, and I believe there is the sentiment to do just that. 

John Jack, CEO of Galetti Corporate Real Estate


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