MyPE

Community Business Directory, Event Listings, News and Views from Gqeberha, Nelson Mandela Bay

How rocky has the 2018 budget left the country?

By

Those hoping for good news for the South African property market in the 2018 budget speech were likely disappointed by the lack of change to the sector’s key influencing factors. Transfer Duty and Capital Gains Tax, as well as their respective thresholds, remain at 2017 levels, offering no apparent respite to investors or homeowners.

While little has changed for the property sector directly, that doesn’t mean the market will be completely unaffected in the months to come, however.

“Property is one of those market segments that is tied very closely to the health of the economy as a whole,” says Tony Clarke, MD of the Rawson Property Group. “When people are concerned for their future – both financially and politically – they steer away from making large, long-term investments. Buying property is about as large and as long-term as most of us ever get, so when things look a little rocky, the property market tends to take a knock.”

The question is, how rocky has the 2018 budget left the country?

“There’s no doubt that from the average citizen’s perspective, things are going to get tough,” Clarke acknowledges. “The VAT increase, lack of adjustment to income tax bands, and reduction in benefits on medical expenses is going to add to our general tax burden, while the rising excise duty and sin taxes, combined with higher fuel levies are going to hit us in the shopping cart. In general, people are likely to find themselves with less disposable income – at least in the short term. That means less money left over for lifestyle upgrades and investments like property.”

As a result, Clarke says many areas in the country may well experience continued property market stagnation in the short term. His medium to long-term outlook – post budget speech – is much more positive, however.

“This year’s budget is a tough one, and it has its issues, but it is aimed in the right direction,” he says. “As a country, we’re digging ourselves out of the economic hole left by the Zuma administration, and there are only so many ways we can do that. By taking such a firm stance, the government is making things tough for citizens in the short term, but they’re also restoring confidence in our leadership and our economy on the global front, which will benefit all of us down the line.”

This confidence boost can already be seen in the strengthening of the rand, which reached R11.55 to the US dollar within 5 days of the budget speech. More importantly, experts are predicting no further downgrades by ratings agencies like Moody’s at this point, thanks to positive reactions to the budget as well as recent political developments.

“This is extremely good news for the economy as a whole,” says Clarke, “particularly in the wake of our dismal performance in 2017. It’ll go a long way towards rekindling foreign investment on our shores, and will hopefully spur renewed economic growth. That will, in time, put money back in the hands of the South African people.”

When that happens, the property market will likely experience a resurgence in activity, making now a smart time to invest for those with available capital. As for those already paying off mortgages, some small comfort can be found in the fact that interest rates, at least, are likely to remain relatively stable.

“My best advice for property owners at this point is to hang tight and ride things out,” says Clarke. “Property is and has always been a long-term game, and while the last few years have been tough for many of us, I think the end of the tunnel is finally in sight.”

The following two tabs change content below.
My Twitter profileMy Facebook profileMy Google+ profileMy LinkedIn profileMy Flickr profileMy Pinterest profile

Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.