There were mixed reactions to Finance Minister Pravin Gordhan’s budget, announced last week, but property agents agree there was some good news for the property market.
“Raising the transfer duty threshold from R750 000 to R900 000 is a welcome concession for buyers in that price range,” noted David de Waal of Steeple estate agents. “For example, a buyer who purchases a property for R900 000 after February 2017 will save R4 500 in transfer duty.”
But, he warned: “The property market, like most of the economy, is struggling but, until the big picture looks brighter, no amount of tinkering with the bottom threshold of transfer duty is going to make a difference.”
Samuel Seeff, chairman of the Seeff property group, said while he believed the increased threshold would “certainly enable more first-time home buyers to get onto the property ladder”, the cost of home ownership remained high “with home owners burdened with rising property taxes, sectional title levies and ever-higher basic utility costs”.
“While the increase in taxation of the wealthy in the form of a new top marginal bracket (45 percent for annual earnings of R1.5m-plus) and higher dividend tax (up from 15 percent to 20 percent) may unfortunately be necessary, we are concerned at the growing burden at the top end.
“Globally, we have seen that burdening wealthy citizens with higher tax does not create more government income, but tends to have the opposite effect. These are generally your entrepreneurs, business owners, captains of industry and job creators. Higher taxes is likely to see more wealth leaving the country.
“It may potentially also take the liquidity out of the top end of the property market”
Richard Gray, CEO of Harcourts Africa agreed that heavier taxes for the rich, could be bad news for the property market.
“This will put a squeeze on higher-income earners. While it should not place too much pressure on their ability to service bonds on their homes, it will likely dissuade investment in second properties – such as holiday homes and rental properties,” he noted.
“Perhaps more seriously for the property market, increases in fuel taxes will take a bite out of the income of all South Africans.
“Fuel prices have knock-on effects on the economy as a whole, and will hit lower and middle-income earners particularly hard.” Households in this segment of the market have already been struggling with South Africa’s general economic sluggishness, especially with elevated food prices.”
To this, Mr Seeff added: “As we have said before, we need a good economy to kick-start the property market. Nonetheless, we remain upbeat that the market should hold up well for the time being. It continues to be business as usual and hopefully the higher exemption threshold will boost demand from first time buyers.”