Budget Speech 2022

Budget Speech 23 February 2022

The finance minister, Enoch Godongwana, delivered his first budget speech. There were no surprises.

Here are some of the highlights/snippets that affect the property sector which is heavily sentiment-driven on the macroeconomic outlook.

Like many consumers, the government has an increasing debt level. Debt as a percentage of GDP is now 70% and is forecasted to grow to 75% in the next 3 years.

The cost of the government servicing its debt is growing significantly and is ± R300 billion a year. That means the government is paying over R821 million rand on interest PER DAY!

On average, 20 cents of every rand collected in government revenue is now being spent on debt repayments, which is crowding out spending on health and basic education.

On a positive note, revenue exceeded expectations by R 181 billion (mostly due to the commodity sector), so that is a good thing.

The extra revenue will go towards stabilising its debt position. 

This means that for the first time since 2015, South Africa will reduce its borrowings. This year, it will borrow R135.8 billion less than planned.

Growth is projected at 2.1%.

These were the positives from the budget. 

A growing economy (albeit small) is a positive sign that we are still on the path to recovery, with revenues increasing and the government signalled using this extra income to service debt (particularly at SOE's).

This budget was generally well-received by economic commentators, and if implemented correctly, will inspire confidence for ongoing investment into the economy, which ultimately filters down to the property sector.

• Transfer duties remained unchanged.
• Capital Gains inclusion rates and tax rates remain unchanged.
• There were no increases in personal taxes and VAT.
• Decrease in corporate tax from 28 to 27%
• No increases will be made to the general fuel levy on petrol and diesel (good for us consumers)
• All these items affect various components of the property industry, so positive indeed
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There is one negative - the "sin taxes" were increased!

So all-in-all, the budget was well-received and reflects some optimism with signs that the recovery is underway and continuing. This will surely support the real estate market.

The state of the economy, political landscape, and investor confidence is paramount to the growth of the property market.

Most people's significant assets are their homes, and I am upbeat. I do believe that 2022 will be a better year than 2021, even though 2021 was actually a good year for real estate.