select
|

Home buyers and builders need a VAT break

A VAT concession on newly-built flats and townhouses would level the playing field for young people who want to become homeowners and might also give the labour-intensive residential construction industry a boost.
 
So says Richard Gray, CEO of the Harcourts Real Estate group, who notes that some 40% of housing demand at the moment is coming from young first-time buyers who favour flats and townhouses, and that builders and developers are responding to this demand by planning and building more of these homes.
 
“According to StatsSA, the volume of plans passed for new flats and townhouses this year is 43,7% up on last year, and the construction phase of new housing has already increased by 8,6%, even though it is difficult at this stage of the market for developers to compete on price with pre-owned units.”
 
Indeed, according to the most recent Absa Housing Review, the current average difference in price between a newly-built home and a similar pre-owned one is still around 33%, and given the ongoing above-inflation increases in building costs, the only way for developers to stay competitive is to make the newly-built units smaller, he says.
 
“In other words, young buyers of these units are getting less home for their money than they would if they bought pre-owned units – although many are content to accept this because new homes come with construction guarantees, typically need much less maintenance in the critical first few years of home ownership and often have better security than pre-owned homes.”
 
However, Gray says, all buyers of new properties – including many people entering the market for the first time – are being penalized in terms of the relative amount of tax they have to pay for home ownership.
 
“Our research shows that home prices being paid by first-time buyers generally range from around R675 000 to R750 000. And the transfer duty (tax) payable on pre-owned homes in this bracket ranges from R2250 to R4500.
 
“But transfer duty is not payable on newly-built homes. Instead, VAT of 14% is usually included in the purchase price, which means that on a unit with a purchase price of R675 000, a whopping R83 000 is the tax component which the developer must hand over to SARS.”
 
This hardly seems fair, he says, and it obviously penalizes developers too because the rate of VAT they have to charge again influences their competitiveness in the marketplace.
 
“For example, if a concessionary rate of VAT of say, 5%, was applied to first-time buyers of newly-built properties, the developer could lower the price of a R675 000 unit to around R625 000 without any loss of profit. And as an added bonus, this would make it easier for potential buyers to qualify for bonds to buy their homes.
 
“In short, a VAT concession on new housing would boost both home ownership and entrepreneurial endeavour in the home building industry.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


  • Tito Xulu - posted 27 Sep 2013 09:27 AM                                    

    this makes sense to drop taxation because it affects price,as more and more people want new properties and the bank lending is strict.

Latest Property News
  • 15 Jun 2018
    The second quarter of 2018 has proven to be the turning point for Midrand’s real estate market, especially the upper end which started to waver towards the end of a tumultuous 2017 with a notable drop in both sales and average selling prices.
  • 15 Jun 2018
    According to data recently released by FNB, the average age of a South African home buyer has increased from 38 to 44 this year. In an attempt to help first-time buyers enter the market sooner, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, walks us through the steps of saving for your first home.
  • 15 Jun 2018
    Putting your house on the market can be a stressful process. There are so many decisions to make that will impact how quickly your house is sold and for how much you can sell it for. It’s a serious money game where you can’t afford to make the wrong decision.
  • 14 Jun 2018
    The word tourist describes someone who is visiting South Africa for a limited time and is probably not going to buy a property here – so why is the tourism industry so important to the real estate sector?
  • 14 Jun 2018
    Serengeti Estates has entrenched its status as one of Johannesburg’s most desirable addresses for a spectrum of homeowners with its launch of The Signature Residences, a new cluster village.
  • 14 Jun 2018
    Keen interest shown at an international event in Hamburg last month has revealed that German investors have a surprisingly healthy appetite for South African real estate, especially those in the market for retirement properties.
  • 13 Jun 2018
    Well located urban properties, from that convenient city pad to the family townhouse or the coveted buy-to-let property can provide buyers with great investment returns over the long term. This is according to Fine & Country which have a number of offices in Johannesburg specialising in the sale of urban properties.
  • 13 Jun 2018
    A R200 million 51-unit luxury apartment project on a vacant lot at 169 Main Road Green Point places the capstone on the radical transformation of the stretch between de Waterkant and Glengariff Road.
    
X
Subscribe to the MyProperty Newsletter

Name  
Last Name  
Email Address  
Email Frequency
select
X
Share this Page

   
For Sale Property
Rental Property
More Options
About
Connect with us
FEEDBACK