Supplementary Budget 2020

#Budget 2019: This is what the property sector hopes to get out

There are four key things the South African Institute of Black Property Practitioners expects to see in Finance Minister Tito Mboweni's upcoming budget, Vuyiswa Mutshekwane, the industry body's CEO told Fin24.

These are:

  • A significant increase in funding for land reform and land-related programmes;
  • An increase in the amount of funding earmarked for infrastructure development and preservation of existing assets;
  • A higher proportion of national expenditure being put towards small business development and support programmes, particularly in the form of equity funding and risk capital funding;
  • 50% of government procurement spend on goods and services to go to women and/or women-owned businesses.

Stimulate transactions

Dr Andrew Golding, group chief executive of Pam Golding Properties (PGP), said a reduction in transfer duty across all sectors of the market, not just the lower end, would serve to stimulate property transactions across the board, with the potential to increase volumes and thereby revenue generation for government.

"As it's evident that the sectors of the housing market which are affordable for younger, including first-time buyers, are the ones which are still buoyant, anything from Budget 2019 that will boost sentiment, household incomes or affordability will provide a significant fillip for the market," said Golding.

Golding said another issue worth consideration is the endorsement of budget incentives to enable quick and cost-effective building solutions to stimulate the lower end of the market.

He would also like to see a review of rates assessments for developments.

Transfer duties, taxes

Samuel Seeff, chair of the Seeff Property Group, called on Mboweni to re-look at transfer duty, especially at the top end of the market, as well as Capital Gains Tax (CGT).
"While government had intended to boost its tax income from wealthy buyers with the introduction of these, it has actually had the opposite and stifling effect on the upper end of the market," said Seeff.

"The property sector is overtaxed. You've got transfer duty, agent's fees, lawyers' fees and CGT. In some instances, the transaction costs can run as high as 20% of the purchase price but add no value to your investment."
He would like to see government cutting transfer duty by 50%, if not altogether, or keep transfer duty and do away with CGT.
"This will boost transaction volumes and with that, higher income for the fiscus," he explained.

In his view, the current situation has also impacted foreign buyers investing in second homes in SA.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett commented that, in his view, there should not be any surprises in the 2019 National Budget for property owners, especially not so close to the national elections.

If any serious changes were to be made, he expects that they would only be announced at the mini budget in October.

According to Goslett, taxes have an important impact on disposable income levels. The lower these levels, the worse the SA economy will be able to perform.

With less money to spend, Goslett said many consumers choose to sell and fewer are able to buy, which translates into a buyer's market and a negative outlook for house price growth.

Rudi Botha, CEO of bond originator BetterBond, comments that higher rates of home ownership can ultimately only come from increased permanent employment, in both the corporate and the entrepreneurial sectors.

"Consequently, BetterBond will be looking for confirmation of the medium-term budget amounts allocated to the expanded public works programme in the Budget to be presented this week, as well as the amounts to be allocated to municipal budgets for infrastructure upgrades and urban renewal, as this will encourage more private sector housing development," says Botha.

"In addition, we are hoping that the minister and his team might be able to increase the amount allocated to housing subsidies to enable more South Africans to acquire their own homes."

Then if there is any money available for tax cuts, says Botha, one of the best options would be to reduce Transfer Duty. In his view, Treasury should also begin to think about some sort of VAT exemption for the first-time buyers of newly-built homes.

A "property market-stimulating" Budget 2019 is not anticipated, given the current fiscal pressures, according to John Loos, property sector strategist at FNB Commercial Property Finance.

"But the Budget is more than merely about transfer duties for the property industry at present. It’s about the big numbers, and the outlining of clear and credible plans to turn macro-fiscal numbers for the better in future years would be the key positive for the property industry," he said.

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