Budget speech delivers on expectations

Feb 21, 2019 7:44:04 PM Share this:

South Africa's Finance Minister Tito Mboweni delivered his maiden budget yesterday. It was expected to be a tough budget by many pundits and it certainly delivered on that sentiment. We know that in order for South Africa to achieve positive economic growth Government is going to have to be tougher on state-owned enterprises. This was a central theme for the Minster and he was very clear about the effect these SOE's have on our economy.

What was reassuring was the Minister's clear focus on rebuilding a stagnating economy.  "It is all of our duty to tend the seed and see that it grows strong, tall and fruitful. It is a budget for the future,” he explained.

The past few months consumers have experienced serious financial pressures as costs continue to rise and bleak economic trends affect the activity in most major sectors. Property was one of those markets that certainly felt the knock-on effects.

The budget, although far more balanced and focused on renewal and growth, it was disappointing that no pressures were relieved on consumers in the property market. The property market is incredibly susceptible to the message and plans in the Budget and how they are instituted.

As predicted VAT remained unchanged at 15% and there was no an increase in personal and corporate income tax. However, the Minister revealed that there would be an increase in fuel levies. Petrol: 29c per litre and Diesel: 30c per litre. In addition, it is expected that real GDP growth in 2019 will rise to 1.5% and then strengthen to 2.1% in 2021.

If we can see the Minster and the Department stand strong on its desire to clamp down on SOE lending as well as aim to reduce pressure on the consumer, the economy will undoubtedly start to gain ground and we will be able to restore both consumer and investor confidence which in turn translates into increased economic activity.

Statement by
Richard Gray
Harcourts Africa Chief Executive Officer


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Topics: Harcourts South Africa, Budget speech, Harcourts Real Estate

What does the budget mean for property?

Feb 24, 2017 6:10:49 PM Share this:
The 2017 Budget will add to the financial difficulties facing South African households. Tough times lie ahead, but they may prove to be a necessary step in addressing our fiscal difficulties.

Finance Minister Pravin Gordhan trod a fine line in attempting to bridge the gaps between South Africa’s pressing social needs, the fiscal integrity of the country, and the patience of the country’s stressed taxpayers.

Tax increases through a new tax bracket of 45% for those earning over R1.5 million a year, as well as increases in dividend withholding rate from 15% to 20% are bad news for the property market. This will put a squeeze on higher-income earners. While it should not place too much pressure on their ability to service bonds on their homes, it will likely dissuade investment in second properties – such as holiday homes and rental properties.

Perhaps more seriously for the property market, increases in fuel taxes will take a bite out of the income of all South Africans. Fuel prices have knock-on effects on the economy as a whole, and will hit lower and middle-income earners particularly hard. Households in this segment of the market have already been struggling with South Africa’s general economic sluggishness, especially with elevated food prices.

Recent research has indicated that South Africans are increasingly failing to save or make provision for the future in order to service their immediate responsibilities.

On the other hand, the increase in the threshold for transfer duties (from R750 000 to R900 000) is to be welcomed, and will provide modest relief for lower-income home buyers.

Overall, the budget offers little cheer for those with property investments. But it is important to note that the budget addresses a troubled economy. The difficult measures are necessary if we are to avoid a debt trap, and remind the world that the country’s economic fundamentals remain strong. With little room for manoeuver, Minister Gordhan performed his balancing act as well as can be expected.

Property, it must be emphasised, is a long-term value proposition. Buyers and owners need to hold onto their investments tenaciously, even in the face of short-term hardship – appreciation is certain, especially when better times arrive again!

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Topics: Pravin Gordhan, Budget speech, transfer duties, Fuel price