National budget ‘neutral’ on a residential property

Herschel Jawitz

According to Herschel Jawitz CEO of Jawitz Properties, the National Budget is not quite as ‘neutral’ as previous budgets, especially from a residential property point of view.

The good news is that where many countries around the world and especially in Europe that are having to introduce austerity measures.  Our economy, however, is still able to fund an expansionary budget with more money being allocated across all the various ministries – especially education and infrastructure. This includes an allocation towards the Gauteng roads which will alleviate some of the proposed toll road pain for consumers.  

What is also noted however, is the increases in various taxes and levies such as petrol and the Road Accident Fund. This will put more pressure on disposable income with fuel costs approaching record levels.

While those who purchased their properties a while ago will be happy with the increase in the CGT exemption threshold from R1.5 million to R2 million, those that already own properties in a legal entity such as a company or a trust, will be dismayed at the marked increase in the rate of CGT from 50% to 66%. 

“This is a substantial increase,” says Jawitz. “At this level,  property owners will need to think more carefully about the benefits of owning a property in a legal entity for estate planning purposes - as an example, versus the CGT implications. Even those individuals have not been spared with their rate of CGT increasing from 25% to 33%.  There has also been no transfer duty relief – not even marginally, taking into account that property prices increased by approximately 4% last year. 

The government is also making a strong and positive statement about housing up to R300 000 with tax relief for developers together with the recently announced government insurance programme to ensure more funding by the banks in this critical sector of the market.

“As with all previous budgets, there seems to be no lack of funding for our country but the question is whether we can effectively deliver at a provincial and local government level.  Unfortunately the track record in this regard is not encouraging,” he says.