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How last week’s Budget affects you

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Finance Minister Tito Mboweni delivered some relief on Wednesday for first-time home buyers and those looking to enter the property market in the affordable bracket.

Overtaxed South Africans were relieved when Finance Minister Tito Mboweni decided not to tighten the daily squeeze.

In his Budget last week, the reality was that Mboweni delivered some relief to households, in particular to first-time home buyers looking to enter the affordable bracket when he increased transfer duty exemption from R900 000 to R1 million and left VAT at 15%. Most experts, and many South Africans, had braced themselves for tax and VAT increases that would have put households under even more financial pressure and dashed the hopes of aspiring homeowners.

The “very calm” budget will not only give local investors confidence to invest in property and business, but will also be a boost for young people to enter the market, said Rawson Property Group chairperson Bill Rawson.

“You have Absa reporting 53% of its home loans last year were to firsttime buyers, indicating there is still an appetite for property.” Experts had feared a VAT increase and once-off wealth tax which would have “thrown everyone into a spiral with more emigration”.

Economist Deward Serfontein described South Africans as resilient: “They only need a few green shoots to get going in tough times. “Given how bad the situation is in the country – with a worst case imagined to be an IMF bailout if things continued as they were – everyone was expecting more taxes and a once-off wealth tax.

“It was a surprising budget and I am cautiously optimistic,” said Serfontein.


Economist Derward Serfontein.. Video: Vivian Warby


Economist Derward Serfontein. Video: Vivian Warby


South Africans will, however, need to contend with increased fuel prices and this, combined with higher sin taxes, will have a knock-on effect on households’ affordability levels, said Dr Rufaro Mucheka, head of strategy and Rest of Africa at Nedbank.

It will also affect the hard hit construction industry and developers. “This budget will call on middle-class consumers, especially homeowners, to re-examine their lifestyles with a call to cut non-necessities to hold on to homes.”


Nedbank’s Head of Strategy and Rest of Africa Dr Rufaro Mucheka. Video: Vivian Warby


Still, “a big chunk of millennials” (those under the age of 40) will feel the relief of not paying transfer duties on property up to R1m, said WEF Global Shaper, Zamantungwa Khumalo of Tshwane Hub.

“The home ownership process is already burdensome so this will offer some relief.” Unemployment, however, had to be better addressed, said Khumalo.


Zamantungwa Khumalo – WEF Global Shaper – Tswane Hub. Video: Vivian Warby

“Youth unemployment is a ticking time bomb. “There are 8.2 million aged 15 to 34 who are unemployed with almost zero chance of becoming part of the property market.”

Mike Greeff, chief executive of Greeff Christie’s International Real Estate said, however, the growth in employment because of the government’s job fund projects was “a huge positive for the property sector because as young people became financially independent, more and more will be able to qualify for home loans and, in turn, become property owners and increase their personal wealth”.

The pilot of the Help to Buy scheme has also supported more than 2000 families to purchase homes. “This is significant as the number of homeowners has increased, and it is only expected to increase further this year.

“In 2019, the Help to Buy scheme supported nearly R1 billion in new lending, therefore aiding more South Africans to own homes.” While it was not an easy budget, Yael Geffen, chief executive of Lew Geffen Sotheby’s International Realty, said Mboweni did well with the small number of tools at his disposal. In addition to the shift in transfer duty, she also welcomed the announcement that an additional R107m would be reprioritised for the refurbishment of 27 industrial parks in townships and rural economies.

The fact municipalities will soon be allowed to purchase electricity from the private sector – alleviating pressure on the national grid and reducing the risk and frequency of load shedding – bode well for both the property market and the country, said Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa.

In addition, the development of smart cities in Lanseria and Cape Town will “drive up demand” for property in both areas. The R500bn allocation over the next three years to finalise existing land claims is another positive element of the 2020 budget, said David Jacobs, a Gauteng regional manager for the Rawson Property Group.


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