Finance Minister, Tito Mboweni presented a “positive budget” under challenging circumstances, perhaps the most challenging over the last twenty seven years, says Samuel Seeff, chairman of the Seeff Property Group.
Seeff welcomes the focus on economic recovery, relief for households, vaccination and the various reforms proposed including in corporate tax, the public sector wage bill and State Owned Enterprises.
We are delighted that instead of facing tax hikes, 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, says Seeff.
A 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.
While Capital Gains Tax and VAT remains unchanged, consumers and household budgets will need to absorb increases such as the 15.63% electricity hike from the 1st of April along with a 26c per litre increase in the fuel levy which will affect their cost of living and eat into household budgets and will offset some of the personal tax savings provided.
Other 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.
The minister further noted that South Africa’s economy is expected to rebound by 3.3% following a 7.2% contraction in 2020. Global growth is expected at 5,5% spurred by vaccine roll-outs, China at 8.1%, India at 11.5% and SADC at 3.2%.
Given that the latest inflation rate of 3.2% as at January is still well within the Reserve Bank’s target range, Seeff says the outlook for the interest rate remains positive and property buyers can still take advantage of the five-decade low borrowing costs.
It remains one of the best times ever to buy property and Seeff expects the market outlook to remain positive based on current conditions. As we have seen over the last year, the bulk of the activity will be below R1,5 million and up to R3 million in the high end areas.
The bank lending climate remains favourable for qualifying homebuyers but sellers on the other hand will need to continue pricing competitively.