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Finance Minister Pravin Gordhan has missed the boat in terms of
incentivising the property sector in his first Budget speech, thus
losing a key opportunity to boost overall economic recovery says
Gerhard Kotzé, CEO of the ERA South Africa property group
"The Budget was disappointing, given what's happening to stimulate
property markets globally and taking into account property's generous
contribution to our overall GDP," he says.
Kotzé says there are indeed flickering signs of improvement in
the
property sector but that the Budget should have been used as the
platform to nurture and expand that recovery beyond the announcement>
that Government would work with banks to find ways to help more middle
income people to access home loans.
"The recovery needed to be kick started. The latest Absa House price
index for example shows that the upward trend in nominal house price
growth evident since the middle of 2009 continued in January, although
real (after inflation) prices continued to decline up to December last
year.
"And the FNB House Price Index shows that the average house price
declined by 3.9% in 2009, although there was an improving trend
towards the end of the year.
"The real pointer to the state of the market, however, is the building
data which show an extremely weak picture for the residential building
sector, a major employment generator, with the three months to
November 2009 reflecting a 35% y/y decline in residential buildings
completed."
Taking a leaf out of the book of overseas markets, Kotzé says,
the
Minister could have introduced a broad tax incentive for homebuyers,
established greater clarity on interest rates and introduced improved
investment incentives for developers.
"House price affordability is the key and in the UK, because of
various incentives, someone with average earnings can now afford to
buy their first house in 21% of local authority areas, up 15% on last
year, and the house price-to-earnings ratio is at its lowest level in
more than six years, making it easier to get on the property ladder.
"In addition, the amount of disposable income needed by first time
buyers to cover mortgage repayments has dropped from its peak of 48% to
about 31%, a far cry from the prevailing situation in South
Africa."
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