Call to put property taxes to work in housing

News > news - 13 Aug 2010
Although the new mortgage guarantee fund introduced by the Department of Human Settlement is to be welcomed, more needs to be done to help lower-income families achieve home ownership.
So says Harcourts Africa CEO Martin Schultheiss, who suggests that the authorities also look at ways to directly subsidise the mortgage repayments on homes in the lower price ranges.
“One possibility,” he says, “ would be to divert some of the taxes specific to property ownership back into a subsidy scheme for first-time buyers below a certain threshold. These taxes include the transfer duty payable on the purchase of properties costing more than R500 000, the capital gains tax payable on some property sales and even the municipal property rates payable by all homeowners.”
Estimates of the national average house price, he notes, currently range from around R550 000 to almost R800 000, “and to buy even at the bottom end of this bracket, prospective homeowners would be contemplating a monthly bond repayment of R4800, assuming they could raise a 10% deposit to start with.
“Now the mortgage guarantee scheme makes it easier for people who can afford that amount to get home loans, but it does not address the twin problems of lack of affordability and lack of stock in the lower price ranges.”
However both problems could be alleviated, says Schultheiss, by introducing a mortgage subsidy scheme that would bring more people into the affordability net, and stipulating that it only applies to newly-built homes.
“This would stimulate the private sector development in the affordable housing bracket that the government is trying to encourage, and have the added benefit of boosting employment because construction as labour-intensive.”
As an added safeguard against misuse, he says, buyers on the subsidy scheme could be restricted from selling their properties for five years, after which they would be free to upgrade – “and most probably start ‘giving back’ to the subsidy scheme by themselves paying transfer tax on a more expensive property.”
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