Property market is indirectly affected by the overall performance of the economy. Leading up to the speech, I therefore remained hopeful that the budget will be allocated wisely and in such a way as to facilitate job creation and economic recovery. While some of what was promised can help towards stimulating growth, thereby positively impacting the local property market, other decisions fell short and are unlikely to achieve their desired outcomes. The increasing of the personal income tax brackets / thresholds will help lower- to middle-income earners which will hopefully provide access to greater disposable income. However, the lowering of the corporate tax rate to 27% is unlikely to stimulate reinvestment or employment as it is not an aggressive enough stance. Treasury is providing tax relief in the form of a 5% adjustment in the personal income tax brackets which should bring relief for low to middle income earners especially.
Missed opportunity is perhaps that transfer duty, including the R1 million exemption threshold remains unchanged. Some relief here, especially at the higher end where transfer duty was increased three years ago could have gone a long way in driving higher sales in the property market and in turn higher transfer duty revenue and economic contribution. Positive aspects of the budget include the significant focus on job creation with an overall allocation of nearly R100bn which includes an infrastructure budget as well as short-term job creation initiatives across various departments. The increases in the pensions and social grants are also welcome news for the economy. Most important from a property perspective is what the Budget will do to address obstacles to economic growth and to boost business and consumer confidence. Tax relief for both individuals and businesses will provide a boost to confidence levels – particularly as possibly significant tax increases were predicted as possible, by some commentators. Government’s ongoing commitment to fiscal consolidation should also be well received by the ratings agencies and investors. All they do is temporarily skew the official unemployment statistics in the government’s favor, give foreign investors and ratings agencies a false picture of the economic stability of the country and offer no long-term benefit to the citizens on the ground who really need sustainable jobs.