My opinion as a Professional Property Investor:
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| Finance Minister Enoch Godongwana (Mail & Guardian) |
One of the most significant announcements in the budget speech was the increase in the threshold for transfer duty on the sale of residential properties from R1 million to R1.5 million. This means that properties sold for less than R1.5 million will be exempt from transfer duty, which will have a positive impact on the entry-level market, making it easier for first-time buyers to enter the market.
The Minister also highlighted the government’s commitment to addressing the housing crisis in the country by providing subsidies to build more affordable housing units. This is welcome news for the property market as it will create more opportunities for property investors to build and sell affordable housing units while also addressing the pressing need for affordable housing in the country.
Additionally, the Minister announced that the South African Revenue Service (SARS) will receive additional funding to improve its systems, including the modernization of its property registration and transfer systems. This will help streamline the property registration process, reducing the time and costs involved in transferring property ownership.
While the pandemic has brought some uncertainty to the property market, the recent budget speech has given investors a little more confidence in the market’s stability. The property market has shown resilience in the face of economic challenges, and with the government’s commitment to addressing the housing crisis and improving property registration processes, property investment remains a viable option for investors, the only question is, will government deliver on these promises?
Investing in Property as part of your investment strategy:
Investing in property is a long-term investment that can yield significant returns, and the recent budget speech has brought some much-needed relief to the industry. The increase in the transfer duty threshold, the commitment to addressing the housing crisis, and the investment in modernizing property registration systems are all positive steps towards creating a more stable and efficient property market.
Despite the various challenges faced by South Africa, the property investment market in the country remains a viable and worthwhile venture. With the rise of remote working and changing lifestyles, there is a demand for properties that offer more space and access to outdoor areas. This trend has led to an increase in relocation to peri-urban and semi-rural areas, with buyers prioritizing properties that offer more space, play areas for children, walking and cycling routes, and off-the-grid installations such as solar power and grey water collection.
The demand for property in South Africa is likely to continue, particularly as banks continue to lend on favorable terms and low house price inflation makes homes more affordable. Despite interest rate hikes and rising costs of living, the property market remains buoyant, particularly in the entry-level/affordable segment, mid-price range, and luxury home sector. According to Rhys Dyer, CEO of ooba Group, the ongoing demand for home loans remained relatively stable in 2022, despite interest rate increases throughout the year.
However, it is essential for buyers to exercise caution and avoid over-extending their budgets when purchasing a property outside their affordability range. Even a small percentage increase in interest rates can significantly adjust bond repayments, and with the burden of higher costs of living on everyone, caution in jumping into a new house purchase is advised. Fitch Ratings also forecast South Africa’s headline inflation to remain above the South African Reserve Bank’s (SARB) target range until late-2023, which could lead to further interest rate increases.
Despite these potential challenges, investing in bricks and mortar remains a sound decision in the long term, particularly with the correct advice from lenders and real estate agents. Tony Clarke, Managing Director of the Rawson Property Group, emphasizes the importance of buyers having a long-term lens when investing in property. “Qualified buyers will likely have their pick of properties in 2023, with preferences for smaller, more affordable properties,” he notes.
Furthermore, with fewer buyers in the market, sellers must be realistic about pricing and be willing to negotiate. As Samuel Seeff, Chairman of the Seeff Property Group, notes, “there are no foreseeable prospects of higher prices going into next year, serious sellers should not waste the opportunity of a serious offer.”
In conclusion, the property investment market in South Africa remains a viable and worthwhile venture, particularly for those willing to exercise caution and take a long-term view. With the right advice and strategy, investors can find great opportunities for economic security and future wealth. Despite the challenges faced by the country, the property market remains a bright spot, and we are confident it will come up swinging on the other side.
Let me know your thoughts on the budget speech and property investment in general.