Players in the property market have welcomed the more generous transfer duty exemption announced in the budget, saying it will benefit first-time buyers and give residential property sales a shot in the arm.
Finance minister Enoch Godongwana raised the exemption from R1.1m to R1.21m as part of his efforts to cushion the effects of the 50 basis points VAT increase on consumers.
Bradd Bendall, head of sales at BetterBond, said the adjustment might seem small, “but it will have a significant impact on affordability and buyers’ ability to invest in property”.
“It will particularly have an impact on younger buyers who may not have the financial capacity to pay transfer duties and also save for a deposit before applying for a bond.”
According to Bendall, first-time homeowners are buying in the R500.000-R1.5m bracket.
Any movement in that threshold means that there’s more disposable income, means that you are paying less on your transfer duty, which means your affordability is improved
— Bradd Bendall, head of sales at BetterBond
“So any movement in that threshold means that there’s more disposable income, means that you are paying less on your transfer duty, which means your affordability is improved.”
Bendall said BetterBond showed the average age at which people bought their first homes was now 37, compared with 33 a few years ago.
“This shows that potential buyers are waiting longer as they work on consolidating their finances before committing to bond repayments. Affordability is one of the reasons many South Africans are taking longer to buy their first home, with many opting to rent until they are in a position to afford the hefty transfer duties associated with a bond.”
Bendall said new homeowners should be careful to buy a property based on their financial reality, not their aspirations. Transfer duty was a one-off payment but a home loan ran for decades, and interest rates were volatile, so repayments could become an unaffordable burden.
“The mistake that first-time buyers make is that they don’t consider these costs since they really don’t have any experience,” Bendall said. “The sector is heavily at the mercy of interest rates.”
In the first two months of the year, residential property prices rose 2.5% on average amid greater buyer activity. “This points to the considerable demand,” Bendall said. “Over the past five years, prices have increased at an annual rate of 5.5% for all buyers, and by 6% for first-time buyers — well above inflation.”
Herschel Jawitz, CEO of Jawitz Properties, said the transfer duty change in the budget sent a positive signal to the market, which was already enjoying the effects of lower interest rates and improved overall sentiment.
“Buyers are feeling more positive, and the transfer duty adjustments will add to the improved level of buyer activity we are seeing in the market,” he said.
Jawitz said given the state of the country’s finances, the 10% adjustment was surprising — but welcome.
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