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Tax breaks for homebuyers would boost economy

Tax breaks for homebuyers could lift the real estate market from the
doldrums and give the flagging economy a boost in the process.

This
is the view of Berry Everitt, CEO of the Chas Everitt International
property group, who says government should seriously consider such tax
relief in the face of the current economic climate and South Africa's
need to encourage and promote homeownership.

"There are
many examples around the world where particularly first-time buyers are
encouraged to buy their own homes through tax incentives, which can
either be in the form of deductions or credits.

"We are
strongly in favour of a system where the interest portion of home loan
repayments is tax deductible. This would benefit buyers especially in
the first years after purchase, since repayments initially consist
nearly entirely of interest payments, with very little capital being
paid off.

"Such a system would assist homebuyers in no
small degree and make homeownership both more attractive and
affordable. Arguments that the fiscus would lose a sizeable source of
income do not really hold water, since the savings would be available
to consumers, who would likely plough the freed-up cash back into the
economy.

"This is very pertinent at the moment as the
economy as a whole would hugely benefit by an injection of increased
spending, which would have a multiplier effect," Everitt says. "And
ultimately such spending would boost the taxman's revenue."

A
second alternative is a once-off tax credit for homebuyers. This would
help new buyers financially in the first year after buying property by
freeing up cash for the many incidental costs associated with
homeownership, Everitt says.

"Both options, however,
would benefit the real estate market as well as the wider economy and
would also go a long way to build a bigger middle class, which would
ensure long-term economic stability in the country."

Issued by Chas Everitt International



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