Subtitle: The February 2024 budget primarily focused on fiscal consolidation amidst sluggish economic growth. Let's take a look at major announcements and any changes to the property market. 

Date: 22 February 2024

Author: Giancarlo Agrizzi (Principal)

The Budget and Debt

The February 2024 budget primarily focused on fiscal consolidation amidst sluggish economic growth. The National Treasury activated the Government Finance Emergency Contingency Reserve Account (GFECRA) due to an increasing debt trajectory and high funding costs, aiming to address a substantial gross financing need and elevated country risk premium. Through GFECRA, R150 billion will be allocated to the National Treasury, expected to reduce debt servicing costs by R33 billion over the Medium-Term Expenditure Framework (MTEF) period.

While the GDP growth rate is projected to improve to 1.3% in 2024 from an estimated 0.6% in 2023, factors such as reduced load shedding and anticipated interest rate cuts in the second half of 2024 contribute to this improvement. However, this level of growth is deemed insufficient, necessitating more robust economic expansion to drive private sector fixed investment and employment. There's a focus on enhancing South Africa's infrastructure with increased involvement from the private sector, underscoring the urgency of accelerating reforms to spur economic growth.

The gross debt-to-GDP ratio is anticipated to be 2.8% lower than previously estimated, reaching 74.7% of GDP in the fiscal year 2026/27. Debt servicing costs are forecasted to stabilize at 21.1% of revenue, indicating a slight improvement from the 22.1% projected in the MTBPS. This suggests that the financial measures implemented, including the utilization of GFECRA, are yielding positive results for the country's fiscal well-being, notably in terms of debt management and servicing expenses.

The Budget and the Property Market

Consumers are now confronted with an uptick in the carbon fuel levy, rising to 11c per litre for petrol and 14c per litre for diesel. This not only escalates transportation expenses across the board but also adds to inflationary pressures. Compounded with bracket creep, where individuals might find themselves pushed into higher tax brackets due to inflation-related wage increases, the burden on personal income is exacerbated for some

Although there's relief that the general fuel levy will remain unchanged in the 2024/2025 Budget, the Minister's imperative to boost income led to the expectation that there would be no further easing on transfer duty for residential property transactions in this year's Budget. This, unfortunately, impacts first-time homebuyers aspiring to own their homes. Presently, properties valued below R1.1 million are exempt from transfer duty, and Lightstone statistics indicate that a significant portion of first-time buyers typically target properties priced between R700,000 to R1.5 million.

The property market appreciates the decision to maintain property taxes, yet concerns loom over household budgets due to stagnant economic growth and rising inflation. Property taxes, including Transfer Duty and Capital Gains Tax, remain unchanged, though there was hope for reductions to stimulate the market. However, disappointment arises from the absence of an increase in the transfer duty exemption threshold from R1.1 million, crucial for buyers grappling with affordability issues in lower price brackets.