Budget 2025: property market needs economic stability, job creation, access to finance

A budget that prioritises economic stability, job creation, and financial accessibility will have far-reaching benefits for the property market and the broader South African economy.

This is according to Adrian Goslett, chairman at the Real Estate Business Owners of South Africa (REBOSA) who told "Independent Media Property" that with the upcoming National Budget Speech, the real estate sector is looking forward to key policy announcements that could provide much-needed support for homebuyers, property investors, and the overall economic landscape. 

Finance Minister Enoch Godongwana will deliver the National Budget on Wednesday, March 12. Last month, Godongwana postponed the tabling of the 2025 Budget, which, amongst other things, intended to increase Value-Added Tax(VAT) by 2%. 

Goslett said: “If the proposed 2% VAT increase does go ahead, this will place additional financial pressure on consumers already battling high interest rates and inflation. This could make potential buyers more hesitant, leading to fewer property transactions."

The organisation, which represents the best interests of business owners of estate agencies operating in the South African residential real estate sector, said that although VAT is not directly charged on the sale of existing residential properties, it does apply to new developments, legal fees, agent commissions, and home-related services.

"An increase in VAT will, therefore, raise overall property acquisition costs which could dampen activity within the local property market.”

JP Viljoen, the Head for Home Ownership at Nedbank, said for home buyers, a higher VAT translates to increased transaction costs, particularly for those purchasing directly from property developers, as the full VAT cost is borne by the buyer.

Viljoen said this could push affordability further out of reach, especially for first-time home buyers and middle-income earners already grappling with elevated interest rates and inflation.

“For the property sector, the increased cost may dampen demand for newly developed properties, particularly in the affordable housing and mid-tier housing market.

"Buyers may shift towards second-hand properties, which are not subject to VAT but rather to transfer duty, leading to a slowdown in new property developments.” 

The head said that for the broader economy, increased VAT would spell a slowdown in property transactions, which could have a ripple effect on related industries, including construction, intermediary (Mortgage Originators) and real estate services.

“Additionally, reduced demand for new builds may impact employment in the construction sector, which plays a crucial role in job creation,” Viljoen said. 

Nedbank Home Loans said that while tax revenue is essential for government funding, an increase in VAT, especially in an elevated interest-rate environment, could stifle consumer spending and economic recovery efforts.

“Alternative revenue-generation strategies, such as improving tax compliance and optimising government expenditure, could be explored instead of increasing indirect taxes that will burden consumers.” 

Professor Waldo Krugell, of the School of Economic Sciences at the North-West University, said over the past three weeks, there have been several proposals on where to source the additional revenue.

He said there are radical suggestions, such as a one-percentage-point increase in the corporate tax rate, a 25% tax on luxury goods, and a 0.1% financial transactions tax.

“The government could also suspend tax deductions for pension fund contributions and medical aid contributions. Cosatu has proposed that the government should not make its contribution to employees’ pension funds for a year.

"Another option is not adjusting tax brackets for inflation to generate revenue from fiscal drag or increasing the fuel levy,” Krugell said.

He said, practically speaking, some spending cuts combined with a small VAT rate increase, some fiscal drag, and a higher fuel levy hike should be enough to balance the books for this year.

“For 2025/26, however, the Minister needs around R60 billion. The key question is whether this is politically feasible after political parties have stated they will not support any tax increases.

"What we need is faster economic growth, but all that the Budget can do in this regard is build confidence. The other necessary reforms must happen elsewhere, and the Minister will have to work hard to convince us that those plans are now gaining momentum.”

Krugell said the upcoming “Budget 2.0” will be a good one if the Minister does not increase the debt level and sticks to the plan of using primary surpluses to stabilize the debt-to-GDP ratio.

He said borrowing more will send a very negative signal to credit rating agencies and buyers of our government debt, further increasing its long-term cost.

Independent Media Property