Positives for property in mini-Budget

This week’s Medium Term Budget Review presented to parliament by Finance Minister Pravin Gordhan was broadly positive for the residential property market, despite the forecast for very slow economic growth, reaching 2,1% this year and just 3,5% by 2016.

“One of the most positive aspects of the mini-Budget,” says Shaun Rademeyer, CEO of BetterBond, SA’s biggest mortgage origination group, “was the unequivocal statement that all government plans and expenditure proposals, at national, provincial and municipal levels, are now firmly aligned to the National Development Plan, which envisages that government will not only improve its own performance but also promote an enabling environment for investment and enterprise development.

“This should be a confidence-booster for both local and foreign investors, many of whom have been concerned of late at the apparent lack of an overall plan and co-ordinated action to take the economy forward. And such confidence is one of the main requirements for a healthy housing market, because without investment, there is minimal scope for job creation or the expansion of home ownership.”

As it is, total capital investment in SA is now projected to increase by 4,1% this year and 6,3% next year. Two thirds of this will be accounted for by private sector investment, which is expected to show growth of 3,5% this year, rising to 5,3% by 2016.
Also positive, says Rademeyer, was the headline-catching announcement of significant cost-cutting measures that will reduce the running costs of all three tiers of government and save the country millions of rands currently being spent on such items as luxury cars, first class travel and hotel accommodation for government ministers and officials, as well as unwarranted and often unmonitored “consultancy fees”.

“By implementing these measures, government departments and officials will hopefully set a real example for the ordinary consumers they are always telling to live on less and save more – and at the least will curtail the waste of taxpayers’ money that could be better used to build more houses for the poor, hospitals, schools or more infrastructure.”

Looking at specifics, Rademeyer says the forecast increase in the household consumption growth rate from the current 2,5% to 3,4% in 2016 is also encouraging, as it suggests improved economic conditions and some employment gains, which will stimulate home purchasing.

“And in this regard, we applaud government’s re-commitment in this mini-Budget to education and training as well as employment creation initiatives such as the new Jobs Fund, which has already approved R3,4bn worth of projects that are expected to create more than 90 000 permanent jobs and about 100 000 training opportunities over the next three years, as well as the new Employment Tax Incentive Bill.”

From a property point of view, the further plans announced to improve the built environment in SA’s increasingly crowded and overburdened cities were also very welcome, he says. These include more than R2bn worth of additional funds to help cities fix and expand their water, power and public transport networks, and to build subsidised housing for the poor that is closer to employment opportunities.

Article by:www.betterbond.co.za

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