A budget focused on economic stability, job creation, and financial accessibility could greatly benefit South Africa’s property market and overall economy.
Adrian Goslett, chairman of the Real Estate Business Owners of South Africa (REBOSA), emphasized the importance of the upcoming National Budget Speech for homebuyers, property investors, and the real estate sector.
Finance Minister Enoch Godongwana is set to present the National Budget on March 12, after postponing it last month. The budget includes a proposed 2% increase in Value-Added Tax (VAT), which Goslett warns could further strain consumers already facing high inflation and interest rates.
Although VAT is not applied to the sale of existing homes, it affects new property developments, legal fees, agent commissions, and home-related services. A VAT increase would raise property acquisition costs, potentially slowing market activity.
JP Viljoen, Head of Home Ownership at Nedbank, explained that higher VAT would make home transactions more expensive, particularly for buyers purchasing from developers. This could make homeownership less affordable, especially for first-time buyers and middle-income earners.
For the property sector, this could reduce demand for newly built homes, shifting buyers toward second-hand properties subject to transfer duty rather than VAT. This trend could impact new developments and slow growth in the construction industry, affecting jobs and economic activity.
While tax revenue is essential, Nedbank Home Loans cautions that raising VAT in a high-interest environment could weaken consumer spending and economic recovery. Alternative strategies like improving tax compliance and optimizing government spending should be considered.
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Professor Waldo Krugell from North-West University highlighted other revenue proposals, including increasing corporate tax, introducing a 25% tax on luxury goods, suspending pension and medical aid tax deductions, and adjusting fuel levies.
Krugell suggested a mix of spending cuts, a moderate VAT increase, and adjustments to tax brackets could help balance the budget. However, securing an additional R60 billion for 2025/26 remains a challenge, especially with political opposition to tax hikes.
He stressed that fostering economic growth is key, with the Budget playing a role in building investor confidence. Ensuring debt levels remain stable and using primary surpluses to manage the debt-to-GDP ratio will be crucial in avoiding negative signals to credit rating agencies and lenders.
