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  • February 27, 2020

With concerned expectation for the 2020 Budget Speech, South African consumers prepared themselves for the worst. Speculation of a possible VAT increase to 16% had already put a damper on everyone’s mood and consumers prepared themselves for worse things to come. Instead, it seems that 2020 is a year of self-reflection for the South Africa Government. Promises have been made to reduce Government’s spending and to focus on kickstarting the economy by motivating consumers to save more money and to spend it at the right places.

There was some good news for the property market and some points raised by Finance Minister, Tito Mboweni, will contribute to Government’s effort to grow the economy and stimulate the property market:

  1. No increase in VAT and exemption of transfer costs on properties priced at R1 million and below

Treasury reported that new tax increases could harm the economy’s ability to recover prompting the decision that there will be no major tax increases apart from annual hikes in fuel and Road Accident Fund levies.


The increase of transfer duty fee exemption on properties (from R900 000 in 2019 to R1 million in 2020) could open the door to more potential buyers. “South Africa is experiencing a buyers’ market at the moment and this will be a welcome relief for buyers buying below R1 million,” says Sandy Walsh, MD Property.CoZa. According to Lightstone, the affordable market segment reflects the greatest growth over the last few years. “This trend is likely to continue for some time and having no transfer costs for these transactions may help to grow this market further,” says Walsh.


  1. Personal income tax relief

Personal income tax brackets will be changed so that individual taxpayers will pay around R2 billion less in income tax. The changes will mean that someone earning R460,000 a year will see their taxes reduced by nearly R3,400 over the next year.  Those who earn around R265 000 a year will see a tax saving of more than R1 500. According to Mboweni, someone who is earning R10 000 a month will pay 10% less in tax. Someone earning R100 000 a month will pay about 1.5% less.


Income taxpayers are already shouldering 52% of SA’s tax burden, compared to the contribution from VAT (26%) and companies (16%). This should put more money in the consumers pocket, in turn helping them to afford homes that are more suited to their needs.


Further to that Mboweni also announced that the annual limit on contributions to tax-free savings accounts will be increased from R33,000 to R36,000 from 1 March 2020 may motivate consumers to save more on a yearly basis.


  1. Support Lending

Working with the financial sector, a pilot of the Help to Buy scheme has supported over 2 000 families to buy their own homes. For every R1 subsidy provided by government, the scheme gathers R8 from the private sector. In a single year, the Help to Buy scheme has supported nearly R1 billion in new lending.


Other factors that will have an indirect effect on the housing market are:

  • Increase in fuel levy

Over the past few years the constant increase in the fuel levy has motivated property buyers to buy property conveniently located close to their place of work, amenities and schools.

The total tax on 93 octane petrol in Gauteng will be increased to R5.88 a litre, and to R5.74 for diesel. This means that tax is now 37% of the petrol price and 39% of the diesel price.


  • Energy supply

It is no secret that South Africa has been burdened with unreliable power supply by Eskom. Government have acknowledged the negative effect Load Shedding has had on investor confidence over the past few years. In a positive move, although a plan is in place to restore the country’s energy supply infrastructure, Government will soon allow for municipalities to purchase electricity from independent power producers. Hopefully municipalities will pay these independent contractors in order to continue power supply.


Mboweni announced that from 1 April 2020, the incandescent light bulb levy will be increased by R2 from R8 to R10, to encourage the uptake of more energy-efficient light bulbs. Government is also considering product taxes on electrical and electronic waste. Energy efficient products have become trendier over the past decade and Government’s move to encourage consumers to reduce their environmental footprint and effectively save money through energy saving is encouraging.


  • Learning, health and social development

A country without residents that work and earn money, is a country that will fail and go broke. Mboweni reported that 8.2 million young people between the ages of 15 and 34 are not in education, employment or training.


Government have emphasised their commitment to helping them. Raising skills and improving the matching of young people and jobs is an important focus of the Presidential Youth Employment Intervention. “For a fast-growing economy we need to make sure our children are well educated, our people are healthy, and our money is invested properly,” promised Mboweni. To date, Jobs Fund projects have created more than 175 000 permanent jobs and helped 21 000 people into internships and created 59 900 short term jobs. Of these, 65% went to youth.


Helping the younger generation to be educated, skilled and employed, will create the opportunity for them earn the income and to either rent or acquire their first home.

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