In today’s Budget speech, Finance Minister Enoch Godongwana announced a series of tax relief measures designed to assist South African households and small business owners, increase savings and support faster economic growth.
These changes come at a time when many families are seeking greater financial stability and new housing opportunities and will thus also benefit the real estate sector, says Berry Everitt, CEO of the Chas Everitt International property group.
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The key tax relief initiatives include:
*The withdrawal of R20bn worth of tax increases that had been provided for in the previous Budget;
*The adjustment of personal income tax brackets and rebates in line with inflation, which will prevent “bracket creep”;
*An increase in the tax-free annual investment limit from R36 000 to R46 000 a year;
*An increase in the limit on retirement fund deductions from R350 000 to R430 000 to encourage consumers to save more;
*An increase in the threshold at which small businesses have to start paying VAT from R1m to R2,3m; and
*An increase in the capital gains exemption on the sale of a small business from R1,8m to R2,3m.
“By reducing the amount of tax payable, these measures will leave more money in the pockets of consumers and small business owners and enable them, among other things, to save for a deposit on a new home, qualify for a mortgage, or make improvements to their existing homes.
“Small businesses should also be able to grow faster and create more employment, which will ultimately also position households to enter the property market for the first time, upgrade to homes as they grow, or invest in additional properties.”
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In short, he says, the real estate sector stands to benefit significantly from this Budget as it adds impetus to the growth in housing demand that is already being experienced in most parts of the country.
“And with a rise in real estate transactions, the sector will no doubt also see an increase in new developments and the creation of new jobs in construction and many other supporting industries. Statistics show that every new home built creates up to four new jobs in other industries such as transport, the manufacture of household goods and retail, multiplying the sector’s contribution to overall economic growth.
“What is more, greater investment or buy-to-let purchasing on the strength of this Budget will expand the availability of rental stock, providing greater choice for tenants and supporting the broader housing market.”
Everitt says the Minister’s tax relief measures send a highly positive signal to the market. “It is unfortunate that the fuel levies have been increased again this year at the same time as the so-called ‘sin taxes’ on tobacco and alcohol, but we foresee that there will still be more money available for consumers to realise their real estate dreams.
“And this will, we believe, do much to foster the positive sentiment that is key to attracting and retaining the investment needed to build strong foundation for more rapid economic growth.”
