South Africa's Budget has positive elements for property and South Africa's future growth

Finance Minister Pravin Gordhan’s budget was no easy feat, and it highlights a slowing down growth rate for South Africa’s economy, but there are several positive elements,” says Mike Greeff, CEO of Greeff Properties, the exclusive Affiliate of Christie’s International Real Estate in Cape Town, South Africa. “We welcome the lack of dramatic spending increases, and the minimising of austere cuts, but it’s quite clear we’re all going to have to continue to sit tight for a while yet,” adds Greeff.

He says that from a property industry perspective, the budget has not affected transfer duty, donations tax, the capital gains tax inclusion rate, VAT and estate duty, and the interest rate remains unchanged. “Since the government is also in the situation of being a debt payer, the current all-time-low interest rate works to its advantage, which also brings relief to anyone paying off a bond,” says Greeff. He adds however, that low interest rates cannot be a realistic long-term situation and that they will inevitably go up.

His advice to bond holders is to channel any extra cash which may be available, thanks to the 2013/14 individual taxpayer’s relief, into a bond to cushion against leaner times when rates get steeper. With regard to the aforementioned tax relief to individual taxpayers, which amounts to R7.4 billion, Greeff predicts that it could contribute to a slight sales increase in the affordable housing sector.

“We need to be guarded about our hopes for improvement in the property market for now though, since the tax relief is designed to be a compensation for inflation, so ultimately numbers will balance out as a higher petrol price will offset extra cash in hand in many cases,” says Greeff. He does however state that the tax relief renders it likely that more bond applicants will meet the banks lending criteria, which will translate into an increase in the number of bonds granted, and therefore more property sales in the affordable housing sector. “This is of course based on the proviso that interest rates remain low,” says Greeff.

“What is extremely heartening is the proposal of a youth wage employment incentive as a credit on payroll taxes. Also hugely welcome is the announcement of the intention to increase the higher education and training budget over the next three years, to accommodate an increase in university enrolment, to renew infrastructure and improve teaching. Apparently it’s anticipated that this would allow an additional 80,000 students to enrol and increase the number of graduates by 32,000,” says Greeff. He adds that these moves are likely to yield huge future dividends for the South African economy.

“I believe that these are laudable actions which will not only benefit the first “born free” batch of youth who have just matriculated, and are keen to make a start on their carers and contribute to society, but will also have positive ramifications for the entire skills base of South Africa; I say this because many of these youngsters have highly qualified parents who might have been considering emigration to give their children a better shot at employment and this potential exodus would only serve to erode our economy. Having belief in their children’s future in South Africa can go a long way to maintaining our contributing citizenry and growing our professional skills base and the value and quality of our private sector, not to mention the collection of much needed tax revenue,” says Greeff.

Greeff also believes that Gordhan’s measures to control government spending and ensure that whatever is spent is done so effectively and without wastage or face reallocation to a sector where results are guaranteed, can only be seen in a positive light by international monitoring bodies who have recently downgraded South Africa’s credit rating. “The government must stand fast by what Gordhan promises, particularly with regard to the spotlight the budget places on The National Development Plan,” says Greeff, concluding that the most positive element which could come out of the 2013/2014 budget is, as Gordhan would hope, that government, business and the private sector all pull together and view this cooperation as an opportunity to reposition South Africa.