Many aspects of the latest Trevor Manuel budget will stimulate the South African property industry, says Bill Rawson, Chairman of Rawson Properties, but none more so than the 'unexpected but very welcome' new tax legislation, allowing property developers to write off depreciation allowances on new commercial developments over a 20 year period.
'Local '“ and some overseas '“ developers will respond quickly to this,' says Rawson. 'It will be a huge stimulus to commercial and, to a lesser degree, to industrial development both of which are now taking off. It will also stimulate retail development which has been doing well for some time'
Previously only buildings which were to be used directly and immediately for manufacture qualified for tax exemptions.
The new donations tax, said Rawson, could also give property a boost.
'We will be reminding our clients that their children could benefit from the increased annual exemption in Donations Tax (up from R50 000 to R100 000), as parents can now invest up to R100 000 in their children, tax-free, in order to convert them into property owners'
Also underpinning the property market, said Rawson, will be the increased tax exemption on deceased estates - up to R3,5 million can now be inherited tax-free.
'Large parts of most estates are usually in property,' says Rawson. 'but people will now be less reluctant to break up their portfolios and convert them to cash before their deaths'
Like others, Rawson said that he hopes that further tax relief will not be squandered.
'The relative prosperity that we are now enjoying in South Africa,' he said, 'needs to be carefully monitored. It concerns me that the growing middle-class is showing far too great a liking for consumer goods and too little appreciation for long-term investment such as property. We need an ongoing education campaign here'
Like many others in the property sector, Rawson said that he had hoped that transfer duty would be reduced and the limit to which it now applies be increased. 'The current cut-off level of R500 000 should be increased annually, by taking inflation into consideration, otherwise the threshold will become outdated again and we would like it to stay relevant to the current property market'
