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Cape Town - The property market, which is fuelled by sentiment, and Budget 2018 – on the back of the election of President Cyril Ramaphosa – are expected to go a long way towards reaffirming investor confidence in real estate, according to Dr Andrew Golding, chief executive of the Pam Golding Property group.
Golding said an interesting aspect of the Budget Speech is the proposal that some 195 000 government-owned properties with an estimated value of over R40bn would either be better used or sold in the short to medium term. This could unlock revenue as well as opportunities for property development and redevelopment.
Samuel Seeff, chair of the Seeff Property Group, said the effect of weak confidence in South Africa has been evident in the property market.
"Since last year there has been an accelerating decline in activity, especially at the upper end of the price scale, being above R8m in Gauteng and above R18m in the Cape," he said.
"Those who do not need to sell or buy are preferring to hold back. This means fewer transactions and a decline in transfer duty paid to government."
Seeff added that, while the year has started on a more positive note, people need to see that the government and economic mismanagement is being addressed and need reassurance that their investments and property will be safe.
Mike Greeff, CEO of Greeff Christie's International Real Estate, said Budget 2018 has done much to allay the fears of investors and the public by presenting a balanced Budget Speech set within the framework of the State of the Nation Address.
"Although there are small changes to the VAT rate and the personal income tax rate, we at Greeff can’t see this affecting the property market," he said.
In his view, property continues to be a good investment.
Bruce Swain, CEO of Leapfrog Property Group, said it is going to be more important than ever for home owners to know where every cent of their personal budget is going, to ensure that they don’t run into financial difficulties.
His advice to buyers is to bear the cost of living increases in mind when house hunting.
“Sellers and mortgage lenders still favour buyers with sizeable deposits and buyers may well find that they can’t put away as much as they had originally budgeted on,” said Swain.
Gerhard Kotzé, MD of the RealNet estate agency group, said Budget 2018 is likely to prove positive for the property market in the medium to long term, even though some of the tax hikes may be difficult for consumers to deal with in the immediate future.
He said it is encouraging that the budget has a renewed focus on two things that are essential for the health of the real estate market. These are substantial improvements to SA’s education system, and youth employment initiatives.
More good news for property, according to Kotzé, is the fact that the economic growth rate is expected to pick up this year.
Berry Everitt, CEO of the Chas Everitt International property group, said Budget 2018 contains some very hopeful elements for South Africa’s property sector, and is well balanced considering the current constraints on the economy.
He said the new spirit of confidence in SA is already being reflected in sharply increased property sales all over the country – and in all price brackets.
“And, in an even more telling reflection of the renewal of hope for our collective economic and political future, we are witnessing the rapid re-emergence of a pattern of upgrading in the middle-income market that has been missing for several years,” he said.
Instead of trying to downsize, he said, an increasing number of repeat buyers are now seeking to move to bigger and better homes.
“There are two major reasons for this, the first being a massive influx of first-time buyers that has caused home prices to rise faster at the lower end of the market than at the upper end and create an unusual opportunity for astute owners to ‘sell for more and buy for less’ as they move up the property ladder.”
The second reason, said Everitt, is that there is a very substantial differential at the moment between the cost of pre-owned homes and the cost of comparable newly-built homes.
“This means that there is plenty of margin for renovation if your preference is for the traditional older homes and large gardens in blue-chip suburbs.
To Rudi Botha, CEO of BetterBond, Budget 2018's increases in VAT, income and fuel taxes are disappointing because they will limit the ability of ordinary households to qualify for bonds and afford their own homes.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER
“This is a blow for a real estate market that has been turning positive for the past few months. National Deeds Office statistics show, for example, a year-on-year increase of 2.25% in the last quarter of 2017 following two years of declining numbers, and our own statistics show an increase of almost 11% in bond approvals during that period, indicating a continued rise in registrations this year,” said Botha.