In the fifth and final budget speech of the current administration, Finance Minister, Pravin Gordhan, said that the whole South Africa has done well as a nation to weather the financial storm over the last five years post-recession, there is still much to be done moving forward.
He noted that the South African economy has largely stabilised and is in a far better place than it was five years ago, recording a positive growth since 2010. It is expected that the economy will continue to grow by around 2.7% over the next year.
“Although the global economic outlook is still unsteady and in some instances is feeling the aftershock of the recession period, the fact that the South African economy has, for the most part, normalised and is experiencing positive growth is encouraging for local consumers. This positive growth, along with the R9.25 billion personal income tax relief, should have a positive knock-on effect on the property market over the next year,” says Adrian Goslett, CEO of RE/MAX of Southern Africa.
Gordhan pointed out that more households have had access to credit over the last year, which is good if used in the correct manner. He stated that there are still too many households which are currently struggling with high debt levels. Households were encouraged to reduce their debt levels and start saving to make provisions for the future.
“Interest rates are expected to continue to rise over the next year,” says Goslett. “The expected rate hikes along with the projected fuel increase in April this year, will increase the financial pressure on households that have high debt levels. Those who can are encouraged to rein in their unnecessary expenditure and focus on eradicating interest-bearing debt.”
Goslett notes that while further rate hikes will negatively affect consumers with high income-to-debt ratios, those who have savings in place and interest-generating investments could see some benefit.
“From a property transaction perspective and how business in the property industry, there was little change. The transfer duty rates remained unchanged, the Capital Gain Tax inclusion rates are still the same and estate duty has also remained unchanged,” says Goslett.
He concludes by saying that the positive contributions that the budget will make, such as the projected 216 000 houses to be built, along with the other budget allocations to infrastructure development, housing subsidies and an increased supply of electricity to more homes, can only be of benefit to the South African economy as a whole, and in turn, the property market.
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