Budget – Some relief but no fireworks

Tweaking of transaction costs is the best property owners can hope for in this year’s budget despite the fact that South Africans are still paying substantially more than their overseas counterparts.

“This situation is exacerbated by the fact that the Government last year collected more than double the transfer duty it did four years ago due to rapidly rising property prices and an increase in sales volumes,” comments Anton de Leeuw, of property investment and education company, YDL. “This should have created the ideal conditions for another decrease in property taxes.”

And it is definitely on his wish list. “SA transaction costs are still high compared to international norms. The maximum rate is R25 000 plus 8% on a property over R1 m. In contrast, the maximum UK transfer duty tax is half of that – 4% for properties over £500 000 (R7 m).

Nonetheless, he applauds last year’s widening of the transfer duty threshold by a whopping 163% - from R190 000 to R500 000. The second and third thresholds were also increased significantly and promised R4.5 bn relief to homebuyers. “This was excellent news for homeowners and is encouraging the secondary market and promoting homeownership. This is aided by R23 bn being spent on government subsidies for 500 000 housing units.

“This increase has eased the affordability burden for first-time buyers, and has brought SA’s threshold at least more in line with international norms,” says de Leeuw.

In the UK, the threshold is £120 000 (R1.67 m). This is 57% of the average UK house price of £210 116 (R2.9 m). This is exactly the same percentage as in South Africa where the average price is R877 000, according to the ABSA House Price Index. In contrast, the previous threshold only represented 25% of the average SA house price at the time it was abolished.

De Leeuw does not expect that the threshold exemption for stamp duties on leases will be increased from its current level of R500. Stamp duty is 50c per R100 or part thereof, i.e. 0.5% of the dutiable amount, regardless of the duration of the lease. This means that leases of less than R100 000 in value are exempt. So, for example, a 12 month lease of less than R8 333 pm does not attract stamp duty.

Neither is he anticipating the capital gains tax primary residence exclusion to be increased from its current level of R1.5 m. But, he expects a marginal increase in the annual capital gain/loss exclusion - currently at R12 500.

“All in all”, says de Leeuw, “no property fireworks are expected in this year’s budget speech, but a bit of tweaking could still bring some relief.”
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