2022 budget ’positive’ for property

Property experts are generally happy with the country’s budget for 2022, saying that while it does not give direct relief to the residential property market, it does aim to tackle economic recovery and personal finances – factors that will encourage and aid property ownership.

There are to be no changes to the exemptions for either transfer duty or Capital Gains Tax (CGT), but other adjustments will help keep money in South Africans’ pockets, which ultimately fuels the property market.

Finance minister Enoch Godongwana’s much-anticipated budget speech took place today, and even though Herschel Jawitz, chief executive of Jawitz Properties, believes the transfer duty exemption should have been adjusted to account for property price inflation over the past year, there are still some positive aspects to celebrate.

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These include the commitment to reducing the budget deficit to 4.2% over the next three years.

“What is positive is the attempt to ‘protect’ consumers’ disposable income. This comes in the form of increasing the personal income tax brackets by 4.5%, most of which will go to the lower and middle income earners. This will also go some way to shielding consumers from the increased cost of living.”

In addition, he says the fact that there will be no increases in either the fuel or Road Accident Fund levies, is welcomed.

“These may be small gestures but they will provide consumers with some relief.”

Jawitz says the residential property market has reaped the benefit of low interest rates over the past two years, but with rising rates and record fuel prices putting pressure on disposable income, the budget provides “some relief” from a further increase in the cost of living.

“This will offer some marginal support to consumers, and thus to property buyers, from an affordability point of view.”

Samuel Seeff, chairman of the Seeff Property Group, is “pleased” that, among other positives, there is more tax relief for individuals. However, he says it is “disappointing” that there is no adjustment in the transfer duty exemption threshold which remains at R1 million and “is now beginning to fall behind the entry level house price”.

“Relief for entry level buyers could go a long way to getting more people into their own homes while the interest rate is so low, and buyers can still secure higher loan to value bonds. Relief at the top end of the price scale where transfer duty and CGT was hiked four years ago, could have provided a further sales boost during this favourable phase in the residential market.”

Explaining further, Seeff says the transaction costs on the upper end of the market – when one takes the transfer duty and CGT into account, is “simply too high” to encourage higher sales volumes.

“When you consider the multiplying factor, the opportunity cost in tax revenue lost is substantial.”

Godongwana’s speech clearly emphasised the focus on economic revival, says Tony Clarke, managing director of the Rawson Property Group, and this will “hopefully settle some concerns from investors”.

“The minister’s aims to create jobs, reduce the cost of doing business and build a competitive economy could well have some positive knock-on effects on the property market as economic recovery, as well as business and consumer confidence, directly impact real estate by influencing the perceived security and attractiveness of long-term investments like property.

“These factors also contribute to job security and income growth, both of which directly affect consumer affordability and, consequently, the accessibility of the property market."

Clarke says one of the most encouraging elements of the speech was the focus on keeping money in the pockets of South Africans and restoring livelihoods.

Lew Geffen Sotheby’s International Realty chief executive Yael Geffen hailed this year’s budget as “the first in years to give South Africans tangible confidence that economic recovery is possible”.

“To have a R180 billion tax over-run in the kitty is a long way from getting us out of the woods, but it eases the crushing burden that every South African business and individual has felt in recent years. I don’t recall another budget in which the tax burden on citizens wasn’t almost universally increased, but this year nothing went up other than carbon tax and so-called ‘sin taxes’.”

She says the inflation-aligned adjustments to personal tax brackets and rebates, as well as medical tax credit increases, will see more money in people’s pockets at the end of the day.

“And this is excellent news for home owners making mortgage payments and people saving to buy their first homes.”

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