South African Property Experts Are Cautiously Optimistic About the Country's 2012 Budget

The South African property market is likely to react to the 2012 budget announcement on various levels. “It will take a while for the shock of Capital Gains Tax rises to settle, but the reality is that the lower to mid-range market stands to gain significantly from the newly elevated exclusion, with sellers looking to make up to R2 million CGT free profit on homes bought since 2001,” says Mike Greeff, CEO of Greeff Properties, Affiliate of Christie’s International Real Estate. “We expect to see a rise in the number mid to upper mid-range, Cape Town properties, coming onto the market this year priced from around R1,2 million to R2,5 million,” says Greeff, who is of the opinion that sellers with more expensive properties are likely to view the budget announcement as a “reality check” and bring their asking prices down, as the rise in CGT over the R2 million exclusion could be viewed as something of a disincentive.

“While higher values might be somewhat capped for a time, the market is likely to readjust to the new reality and once the mindsets of investment buyers have been recalibrated, and they’ve shifted funds into more tax effective options, property values are likely to start cautiously edging up again,” says Greeff. He adds that decisions to buy or sell property are generally not solely ruled by tax implications. Affordability, ultimate returns, the need for liquidity and the amount of time one is planning to hold on to the property, are all components which play significant roles.

Greeff advises bond payers to take advantage of the reduced rates in personal income tax and channel those extra Rands into a bond. “ It’s going to take some discipline though, since the additional Rands in your bring-home pay are not in line with the inflation rates and are too easily swallowed up by grocery bills, fuel and electricity,” says Greeff.

All investors, however, according to Greeff, need to view these new parameters as a catalyst for making informed decisions and moving forward. “Overall, the effects of the budget will be positive in that they’re likely to give the whole property market some much needed impetus, particularly  as we now know where we stand, and one can make investment plans and financial decisions with an increased level of certainty.”

Pictured Above: South African Finance Minister Pravin Gordhan