If you have been watching or reading the recent news you should have heard Tito Mbweni, our new Finance Minister give the recent medium term budget review on 23rd October. In summary, it showed reduced revenues, higher than expected spending, reduced employment rate and low forecast growth.
We also attended a presentation by John Loos, the FNB economist who had the same message; things will get worse before they get better. It will take a while to undo the damage done to the economy over the past 5 years or so.
As the economy has a major impact on the housing market, it seems as if there will be tough times ahead on all fronts. The house prices in Constantia have only just started coming down, and if it is similar to the 2008 downturn, it will be about 3 years before we see an upward trend again. House prices are cyclical, they go up a lot, come down a little, with a long term trend that has always outperformed inflation. One buys and sells in the same market, and now is a great time for first time buyers, and those looking to upscale. And please note that we have talked to people from Europe, Canada and Asia - also complaining that the housing market is slow, and prices are down... So we are not alone! In tough times like these, it is important to choose your property agent carefully, one with the experience and the backing of a reputable company to sell your property and we hope you choose Seeff.
Key points from Budget:
- Compared to February 2018 budget, expenditure up by R12bn and revenue down R83bn for the period up to Feb 2021.
- Government debt as a % of GDP is up and continuing to grow, projected to reach 59.6% in 2023.
- Income tax and VAT revenues good, corporate tax and property tax revenues are down.
- More spending on job creation and social grants will be funded by higher borrowing.
- Parastatals (SAA, Eskom, Road Accident Fund etc) all sucking the coffers dry.
- Public sector wage bill is 14% of GDP and given the above inflation wage increases and no retrenchments, this is will only get higher.
- The government still wants to bring in National Health
Author: Nikki Edenbrough