Generally the budget presented by Finance Minister Manuel is balanced and fair with few surprises.
From a real estate perspective although it was disappointing not to see thresholds of transfer duty on residential property being moved up, the exemption of stamp duty on leases of less than 5 years is favourable. Generally commercial leases range between 3 – 5 years and the 5 year threshold will probably reduce that norm to 4 years and 11 months.
The elimination of retirement fund tax is most welcome and should be good for both listed and direct property investment by funds including their participation in private equity transactions.
Weil said that JHI has a number of clients who have made investments including property investments in Africa and the lowering of the FDI Investment shareholding ratio from 50 – 25% will be viewed as extremely positive having regard to legal requirements and desirability of having local partners in these countries.
Weil added that the change in taxation relating to dividends will have a limited effect on yields of property companies listed on the JSE but could have implications for distributions from PUTs which are classed as a dividend though not taxed as such.
Given capacity constraints now that most categories of investment property carry no vacancy, the announcement of accelerated depreciation and wear and tear allowances extending to newly constructed building in the non-manufacturing sector will be greatly welcomed by developers and investors.