From our CEO: Budget plus points

Category Berry Everitt

This week's Budget was surprisingly positive, considering the really tough decisions that obviously had to be made to balance the national books while also trying to retain the confidence of local and foreign investors and hopefully convince Moody's not to strip SA of its investment-grade credit rating.

That's the word from our CEO Berry Everitt, who says these tough decisions include the commitment to slash the public service wage bill (which is bound to be very unpopular) as well as making significant reductions in the allocations to much-needed government housing, education, health and public transport over the next three years.    

"The most positive Budget news is of course the fact that there will be no VAT increase and that taxpayers will in fact get R14bn worth of relief this year. According to the Finance Minister, the average salary earner will pay around R1500 less tax this year than in 2019, and while that isn't a great deal, it will help to increase consumer confidence, especially when combined with relatively low inflation and, hopefully some further interest rate cuts later this year to stimulate economic growth."

From a real estate point of view, he says, raising the Transfer Duty (TD) threshold to R1m is also positive, especially for first-time buyers and also for the banks, many of which are now offering home loans that include transaction costs like TD, bond registration and legal fees. "Their risk will be less, and this may enable them to offer even better loan interest rates in their current keen competition to acquire new borrowers.

"For prospective home buyers and existing home owners, the additional R426bn allocated from national funds to assist local authorities to deliver better basic services and maintain existing municipal infrastructure is also encouraging news, because everyone hopes to live in clean, tidy and well-maintained areas with uninterrupted access to water, electricity and other services. This also protects property values."

And speaking of utilities, probably the biggest positive in the Budget was the news that SA's electricity supply system is already in the process of being radically restructured - with production by independent power producers being accelerated, local authorities being enabled to buy power now from independents rather than Eskom, and individuals and businesses being encouraged to produce solar or wind power for their own needs and feed back any surplus into the grid.

Everitt says this will hopefully remove the biggest stumbling block to real economic growth and the large-scale employment creation which is the real key to the future expansion the real estate sector and property value growth.

Author: Meg Wilson

Submitted 27 Feb 20 / Views 50