A measured budget that has delivered positive sentiment so necessary for our economy and one that should reaffirm the underlying strength of our property market is how Samuel Seeff, chair of the Seeff property group has described Finance Minister, Pravin Gordhan’s budget yesterday.
The tone was very positive and government and the minister needs to be congratulated for showing commitment to the country and economy and kicking the fiscus off on a positive note.
There are many positives that came out of today’s budget and if government can deliver on these, it gives us much hope for economic recovery and with that, a prosperous property market, one that will encourage sellers and buyers alike.

Positive for Housing 

Much of what we heard today, save for the hike in the transfer duty for the R10 million-plus housing sector and rise in Capital Gains Tax (CGT), is positive, says Seeff.
On the plus side, there is the added R5.5bn relief in personal income tax for lower and middle class income earners. This will provide some relief against rising costs and inflation and encourage home ownership.
The only real concern that we have is the hike in transfer duty at the upper end of the market for the second successive year, this time taking it from 11%-13% for transactions of R10M and above.
Based on what we have seen following last year’s hike, we would reiterate our concern that rather than generate the additional funds sought, it decreases the incentive to sell and trade in the market.
Over the last year, we have seen sellers in luxury areas such as Cape Town’s Atlantic Seaboard and City Bowl preferring to stay put, extend and renovate rather than sell and pay the additional few hundred thousand rand in transfer duty. This will most certainly affect the trade-ability in the luxury areas and could be a notable draw-back for the market. You would need quite a few lower market transactions (maybe as much as 10-15) to make up the loss of transfer duty on a R10M transaction, says Seeff.

In a market such as Cape Town, the R10M-plus sector affects whole areas. The Atlantic Seaboard and City bowl for example contributes about a third of the total annual value of property sales for the metro. About 40% of the almost R7bn traded across the Atlantic Seaboard and City Bowl falls in the R10M-plus price sector, so it is quite a sizeable market.
Only time will tell whether minister Gordhan has done enough to create confidence and positive sentiment and whether we will prevent the looming junk status downgrade. The recent recovering strides taken by the rand though does give us encouragement, says Seeff. Government’s willingness to work with business, the encouragement of the private sector to get more involved in projects with government, new growth sector planning and even the news around perhaps privatising aspects of SAA, all bodes well for the economy and we are certainly feeling positive today.
Follow-through though will be vital, says Seeff. Aside from market commentators and economists, we need consumers and investors to feel confident about the economy. They want to know that if they put their money into the country and into property that their investment will be safe and that they do so in a growing economy.
As for the property market, we are delighted that save for the transfer duty and CGT hike, there were no upsets. So far, we are still seeing the market as fairly positive and while no fireworks are expected, anticipate it to remain business as usual.
Those who can and want to will continue to buy and should do so. Conversely, those who want to sell and find a buyer willing to pay their price, will and should continue doing so.
While prices are under pressure in some areas, there is still enough demand and, with stock levels still fairly tight, the market remains fairly well balance for the time being.

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