BUDGET 2017

BUDGET 2017

If you asked for a word, I’d say: “Neutral”.

Without all the detail in which I’m sure you’re well read by now, only one highlight stands out for property and that is the raising of the threshold for properties that are valued at R900 000 (from R750000 currently), or less which will not be liable for transfer duty. A 20% increase “gift” to spur first-time and low-income house ownership.

As for the rest of the budget, don’t confuse “neutral” for a lack of interest. Of course, he raised the bracket for R1.5m and above to 45% but that could be seen as part of a progressive tax strategy. And then, the infamous “sin taxes” which will always be there to make wine more expensive and balance the budget. What he never did was raise the thresholds for the middle income which makes this group one of the most taxed in the world in total. That saving for SARS is estimated to be worth about R12bn and is simply increased taxes as a result of inflation-adjusted increases. In other words, if you get an increase equal to inflation, you will earn less after tax in real terms. Sad but true. Beyond that comment, the usual massive increase for education is a valiant effort by government to educate the young people for leadership and technical roles in the future. To be honest, education often feels to me like throwing good money after bad when I hear how many schools behave and/or perform. Tragic that we are extremely poor in Maths and Science and that we still have mud schools; surely inarguably acceptable with a budget of R320bn per annum.

In all Minister Gordhan attempted, he needed to fill a R28bn Income hole. He did this with a slight rise in borrowing but is still above the global benchmark of 3% of Debt to GDP. This R2tn debt, added to spiralling government job counts and cost is really precarious if rates [cost of funds] start to rise generally, or in the event of a downgrade. It was remarkable how, after speculation of an impending reshuffle, Tom Moyane’s constant niggle and Brian Molefe’s swearing-in, that the Minister could still assert that he will continue to represent SA Inc as good for the Ratings Agencies to not downgrade us. How motivated would you or I be under similar pressure?

So what Gordhan did not do or say is good. He did not shrug off the Agencies and borrow to appease “radical economic transformation”. He did not cut social welfare, security or education. He did not follow suit on the radical use of the term “radical” as we had heard in the SONA and he did not jitter the markets. Amazing, in round figures, the Rand lost about 1% in 24 hours and pulled back below R13/USD in the next 24 hours. And we even got a small [though short-lived ] petrol increase! All-in-all, a fine achievement for property.

Yes, it could have been worse but we can expect growth to continue to improve to over 1% this year. As I hear that the Vaal Dam may overflow soon, it would seem things are turning in our favour. And commodities seem to be sustaining their price rise. But the Minister can do little more for house prices to rise. He needs help from No1 and his cohort of Cabinet ministers. From that side of the ring, the worst we can have is a damning, harmful cabinet reshuffle in which key ministers are punished for their lack of political support. Harmful because it will crush Confidence and lead to further loss of jobs. That, more than anything else we can foresee, would be bad for property. But, as I have said before, I believe that we have managed interest rates well and I get the sense that no increase in SARB rates will occur this year. If we can keep a strongish Rand, behave ourselves in an Elective year and enjoy some natural benefits like rain and ore prices, we could see things improve. A long shot for which I stick my neck out.

So, from Homeloan Junction’s side, we continue to affirm this country, the resilience and common-sense of her people, and the abundance of her natural resources. As such, we remain positive that the year will trend positively. You can be sure, in that spirit, that we will be here to service your homeloan needs.

Yours in Property.

 

Jack Trevena

Jack Trevena

With over 30 years of experience in the banking and home loan industry, my hope it is share what I have learnt over the years with my blogging community, inspire conversation around the subject and in the process discover unique insights into this ever changing environment.
Jack Trevena

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