Another appeal to review home purchasing costs

A serious review of home purchasing structural costs with the purpose of stimulating property market conditions and particularly encourage first-time buyer purchasers has been called for by a leading real estate figure.

Specifically, Jeanne van Jaarsveldt, finance and director of RE/MAX of Southern Africa, the country’s largest residential real estate vendor, would like to see the current threshold on payment of transfer duty only kick in on sales above R1m and the consideration of meaningful tax breaks for first time buyers.

The appeal, not the first time in the industry’s history, but probably at its most justifiable moment in terms of troubled times, comes against a backdrop of ailing sales and soaring arrears in mortgage repayments.

Alliance Group reported recently that the number of home owners in mortgage repayment arrears of at least one month has more than doubled to 55 000 in the last nine months, a figure that van Jaarsveldt believes can only get worse unless seriously addressed by government.

Van Jaarsveldt believes preventative action or a rescue package is vital by the government to avert further property market distress. Tax breaks, he advances as an urgent consideration be given first-time buyers while a raising of the transfer tax threshold could help stimulate movement in this beleaguered market. He points out that the US government has anchored its recently launched Housing Stimulus Bill around a tax break of more than R52 000 for first time buyers to help stabilise the market. The measure has been widely applauded by property stakeholders in that country.

Van Jaarsveldt says a similar tax concession in SA would help soak up some of the affordability pressure on first time buyers ensnared through no fault of their own by the five percentage point interest rate increases in the past two years.

With affordability, based on the ratio of mortgage repayments to remuneration, soaring to its highest level since the beginning of 1990, as reported by Absa, it was equallly deserving that serious stimulation be given to encourage property ownership by a temporary suspension of transfer duty on all price categories until the market moved into a definite recovery mode. This tax had become particularly burdensome for home buyers in terms of the tougher credit regulations.

He points out that the Real Estate Institute of Australia (REIA) is vigoursly pressurising that country’s government for exemption of stamp duty on first home buyer sales and retiress downsizing as is Britain’s National Association of Estate Agents (NAEA). Both bodies believing the move would ease pressure throughout the whole housing market giving people a reason and incentive to come back.
Dawie Roodt, chief economist at Efficient Group, would like to see property transfer duty completely abolished, pointing out that its taxation had been overtaken by the huge personal tax increases placed on middle and upper income group in the past couple of years. “It’s too expensive and throws sand in the workings of the freemarket system that should be allowed to flow free of state impediment.”

It’s abolishment would strip the fiscus of roughly R10bn a year, which Roodt, says would not make any serious indent from the fiscus point of view. And while its benefit would not have a great impact on the property market in general it would certainly ease up the buying and selling of homes and act as a much needed market stimulator.

While admitting some concern at the decline in sales volume, Roodt anticipates some relief on interest rate pressure, foreseeing the possibility of an interest rate cut in about six months time, depending on inflation rate patterns. But, between now and then, he does expect property market conditions to get a little worse.

Current political uncertainty, in spite of having a negative effect on the economy and in particular a further cause of dampening on the property market, he expects to ease soon and slow down emigration patterns.

Mike Bennett. CEO of KZN’s ProProp Franchising Group, would also like to see a temporary suspension of all transfer duty on sales under R1m until the market improves and banks be given permission to relax the National Credit Act regulations on home sellling prices of under R700 000. Both gestures, he says, would stimulate the first time buyer market substantially.

Van Jaarveldt who sees the housing market “as a pillar of our economy” believes the current high number of negatives surrounding the market make it vital for some concession to stimulate home ownership. “To ignore the situation seriously jeopardises the continual growth path of the emergent black middle class who we all know are vital at this stage of our country’s economic transformation.”
Loading comments
More news articles
Guidelines to securing a home loan
29 May 2018
Many young South Africans are working hard to achieve their dream of purchasing their first home. However, the process can be challenging due to the daunting application process, which can take up to 2 years and is often enough to discourage prospective buyers.
read more
Things you should consider before upgrading to a new home
23 Apr 2018
The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
read more
Bond Calculator
Calculate the estimated repayments on a home loan and savings with extra payments