Heading into yesterday’s National Budget address, property experts asked for just a handful of things: an increase to the Transfer Duty threshold; tax incentives for homeowners and businesses to invest in solar power; and tax relief for consumers who have forked out money on devices to mitigate the effects of load shedding.
And while they did not get all they asked for, they got most of it – even if it wasn’t packaged the way they hoped.
As the Meatloaf song goes, ‘Two Out of Three Ain’t Bad’.
Gerhard Kotzé, managing director of the RealNet national estate agency group, says there are several aspects of the Budget that will be beneficial to home buyers and owners in South Africa, and will help to increase property demand and values going forward.
“The first of these is the news that tax revenue collected in the past year was R93 billion higher than expected. This enabled government to budget for R13bn worth of tax relief for individuals and businesses.”
Transfer duty threshold ✔
Among the relief measures, he says, is the increase in the transfer duty threshold, which will especially benefit first-time buyers;
Carl Coetzee, chief executive of mortgage originator BetterBond, was another property expert to welcome the increase in the Transfer Duty exemption threshold from R1 million to R1.1m.
“This 10% increase bodes well for first-time homebuyers especially, by making it easier for them to get a foot on the property ladder”.
Echoing this, Pam Golding Property group chief executive Andrew Golding, says the increase will, in some measure, help make homeownership more accessible for first-time buyers, particularly as the average price paid by this segment of the market in January 2023, according to ooba, was R1.13m.
Citing ooba data further, he says applications from first-time home buyers rebounded to 47.7% in January 2023, following a low of 45.8% in December 2022 – the lowest reading since early 2017 due to the cumulative impact of repeated interest rate hikes weighing on household finances.
Tax incentives to go solar ✔
– Homeowners
While Golding says the introduction of tax measures to encourage businesses and individuals to invest in renewable energy and increase electricity generation is also welcome, his concern is that the overall cost to individuals for installing rooftop solar panels is “beyond the reach of the majority of South Africans”. Furthermore, the fact that this incentive is only available for one year – and only 25% of the investment, up to a maximum of R15 000, is disappointing.
Despite the one-year tax rebate of 25% being capped at R15 000, Kotzé says it is still a “positive element” of the Budget for homeowners.
– Businesses
Even more exciting, though, is the two-year incentive on the table for small businesses to invest in renewable/ alternative energy generation.
“They can reduce their taxable income by 125% of whatever they spend to generate their own power in this way, and there is no limit at this stage. What is more, government is providing guarantees on Bounce Back loans that will make it easier to obtain bank finance for their installations.
“We foresee that this will lead to the creation of significant extra capacity by businesses, which could then all be fed back into the national grid to help relieve the current shortfall of 4000MW to 6000MW, and end load shedding,” Kotzé says.
High Street Auctions director Greg Dart agrees that Finance Minister Enoch Godongwana’s announcement of radical tax incentives for businesses investing in sustainable energy infrastructure was “one of the good pieces of news” to come out of the National Budget. It is also “very likely going to be the lifeline needed by numerous sectors that are at the brink of collapse”.
“Businesses being able to deduct 125% of the cost of wind, solar, hydropower and biomass projects in the first year – with no limits on how much can be claimed, nor how big the project is – will incentivise the private sector to reprioritise its short-term capital expenditure.”
He explains that the positives for the private sector include the easing of trade and industry’s risk exposure from the “crippling effects of load shedding”, and being able to claim back in tax 25% more than the infrastructure spend itself, which will provide much needed relief to business budgets.
“And although the household tax rebate for investment in solar panels over the next year is smaller at 25%, every bit helps.”
Everitt agrees: “This will no doubt assist many businesses large and small to stay open in the face of increased load shedding and the rising cost of diesel for generators, and therefore help to preserve the employment they provide.”
Load shedding tax relief ✖
One of Goldings hopes for the 2023 National Budget was an introduction of tax relief measures further extended to individuals having to invest in a range of additional costs. These include gas stoves, generators, invertors, UPS devices, surge protection devices, battery-powered LED lighting, the costs of purchasing and running generators, batteries – including those utilised for security purposes, and the like.
“Surely such items, which carve a chunk out of household disposable income and which have become a necessity – amid the National State of Disaster declared for the energy crisis – should be considered for tax relief for financially over-burdened consumers.”
Alas, this was not to be.
“As far as those home purchasers with the means to do so are concerned, and considering the current electricity crisis, we are finding that solar energy and inverters are increasingly in demand when looking to invest in a residential property. While difficult to quantify the actual value add in monetary terms, such features do make homes more sellable as the property appeals to a wider market and will sell quicker than a home without these features.”
As with the tax measures introduced to encourage homeowners to go solar, Berry Everitt, chief executive of the Chas Everitt International property group, hopes a similar rebate will be introduced in future for storage batteries, “which are generally the most expensive components of domestic solar power systems”.
An extra positive
Kotzé says the “massive allocations” for expenditure on infrastructure such as roads, harbours, dams, bridges, and water supply systems will not only be a huge driver of job creation and home buying capacity, but also help to improve the quality of life in many areas, promote the development of new housing stock and make them attractive to homebuyers.
“In tandem with this, we welcome the increased allocations to the entities fighting crime and corruption in South Africa. There is a direct correlation between a positive perception of the country and a positive property market. And that perception depends on consumer and business confidence in personal safety and good governance as well as the prospects for economic growth.”
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