Property experts cautious

Market reaction to Gigaba’s VAT increase in the new Budget ‘almost subdued’

REGAINING global credibility and satisfying agency ratings should remain Finance Minister Malusi Gigaba’s top priority to reaffirm investor confidence in real estate, property experts have said.

As expected, Gigaba raised VAT by one percentage point and announced increases in sin taxes and fuel. Market reaction was almost subdued and the rand strengthened by 10c after his speech.

Andrew Golding, chief executive of the Pam Golding Property group, said the government had performed a delicate balancing act.

“Speaking from a property perspective, this is a market fuelled by sentiment, and as a consequence a Budget which satisfies the above criteria – on the back of the election of President (Cyril) Ramaphosa – is expected to go a long way towards reaffirming investor confidence in real estate.

“South Africans continue to demonstrate an increasing appetite for home ownership, which is to be encouraged as it helps provide security of tenure and financial security for the future,” Golding said.

It was encouraging that the government was looking to use or sell its 195 000 properties with an estimated value of R40bn, he added.

Jacques du Toit, property economist at Absa Home loans, said ratings agencies would be cautious with South Africa.

“They will be very cautious because state finances are still very much under pressure even after the finance minister’s announcements.

“More money is being taken out of the consumers’ pockets. The increase in VAT and the below-inflation tax relief on personal income tax, and the increased fuel levies, will have a negative impact on consumer finances. This will indirectly impact on property affordability,” he said.

However, Du Toit said any property up to R900 000 in value was still exempted from transfer duties.

Samuel Seeff, chairperson of the Seeff Property Group, said the improved economic outlook was what was needed, but raising taxes for working households was simply unsustainable for the economy.

“By taxing the very people who are growing the economy, you are making it very difficult for business owners and entrepreneurs to feel positive about investing further into the economy,” he said.

Rudi Botha, chief executive of BetterBond, SA’s biggest bond originator, said: “The increases in VAT, income and fuel taxes are clearly disappointing from our point of view because they will limit the ability of ordinary households to qualify for bonds and afford their own homes.”

RAISED TAXES WILL LIMIT THE ABILITY OF ORDINARY HOUSEHOLDS TO QUALIFY FOR BONDS