04 Mar 2013
Budget 2013 presented by Minister of Finance Pravin Gordhan has been given the thumbs up even though in his presentation, he says the 2013 Budget is presented in challenging times, pointing out that this is a budget in which there is limited room for expansion, yet there are significant opportunities for change.
Gordhan says the economy shows signs of improvement although global outlook remains troubled.
He notes that South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.
“The 2013 Budget takes the National Development Plan as its point of departure and the strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.”
Among other things, he says Government has taken measures to control growth in spending and plans are in place to reduce spending by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.
Government will continue to invest money into infrastructure programmes as well as the review of tax policy framework in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.
In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted, says Gordhan.
He points out that the budget continues to invest in education, health, housing, public transport and social development – components of the social wage which add up to about 60 percent of public expenditure.
Local government, community amenities and housing are allocated R132 billion in 2013/14 while the budget for housing and community amenities has increased by over 16 percent a year since 2008.
The main contribution of the national budget to the financing of household amenities is the local government equitable share noting that a new equitable share formula is proposed in the budget and this will provide a subsidy of R275 for every household with a monthly income less than R2 300, or about 59 percent of all households.
“We also recognise that many businesses provide their employees with housing assistance or home loans.”
However, the current fringe benefit tax is unduly burdensome in cases where an employer transfers a house to a low-income worker at a price below market value.
“Tax relief is proposed to address this difficulty,” he says.
The housing market
Meanwhile, Jan Davel, managing director of RealNet estate agency group and Lew Geffen, chairman of Sotheby’s International Realty have welcomed the positive approach to affordable housing revealed in the budget, with the provision to build more than 400 000 low-income houses over the next three years in addition to the 2.7 million homes already provided by the Department of Housing since 1994.
“We simply have to eradicate informal settlements and get people into proper housing, and tackle the deterioration of municipal service networks in our towns and cities because decent housing in decent surroundings is a key to becoming a winning nation,” says Geffen.
Geffen says the property industry should be encouraged by the plans to reduce the tax burden on and give financial assistance to small, medium and micro-enterprises that are major providers of new jobs, and the assistance that will be provided to SA companies wanting to expand into Africa as well as foreign companies who see SA’s potential as a “gateway” to the rest of the continent.
These measures, together with the billions to be spent on improving infrastructure such as roads, railways, harbours and power plants, should bring about a further significant increase in economic growth over the next few years, he says.
Berry Everitt, managing director of the Chas Everitt International property group and Herschel Jawitz chief executive officer of Jawitz Properties expressed disappointment in the budget as the transfer duty threshold was not lowered and rebates on the interest paid on home loans was not granted.
Jawitz says a drop in the threshold, below which transfer duty is not paid, or a drop in the rate would have certainly provided a welcome boost especially for the lower end of the market and for first-time buyers.
He points out that the transaction costs for buying a property are relatively high.
Coupled with deposit requirements from the banks, a first-time buyer purchasing a home of R800 000 may need to have as much as R80 000 in cash to put down, pay legal fees and transfer duty.
“Many buyers simply don’t have that kind of money and are being kept out of the market despite being able to afford the monthly repayments because interest rates are at low levels,” according to Jawitz.
According to Samuel Seeff, chairman of Seeff, the rising costs remain a concern, most notably the additional fuel and other levies.
Seeff says while they would have liked to have seen some lowering of property transaction costs, rates and taxes for the lower to mid-market property sector, they are pleased with the positive stance taken by the minister.
“Even at the top end of the market, some incentive could have served to stimulate demand and encourage property investment that should always be seen in light of the greater economic benefits including GDP contribution,” he says.
Seeff is more optimistic about the market pointing out that there was definitely some improvement in market sentiment and activity in 2012 and this has carried into this year with many of our branches reporting improved demand and sales volumes compared to last year.
He says there is good demand and expects 2013 to be a good year for the property market especially in the sub-R2 million sector.
“Turnover should be up, but prices are likely to remain static while well-priced properties are starting to move faster and many of our areas are reporting stock shortages.”
Seeff notes that market related pricing remains vital for sellers who hope to conclude a successful transaction. – Denise Mhlanga
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