TRANSFER DUTY: Calls for concessions ignored
For the second year in a row the budget has offered no relief to homebuyers, causing dismay in the property world
Industry players are disappointed that the government hasn’t offered any relief to homebuyers in this year’s budget. It is the second consecutive budget to make no adjustments in transfer duty rates, the tax-free threshold or capital gains tax (CGT).
The last time changes were made to the way in which residential property sales are taxed was in 2017, when the transfer duty exemption threshold was raised from R750,000 to R900,000.
In 2016, higher transfer duty rates were introduced at the upper price ranges along with an increase in the CGT rate.
Housing industry players were hoping for some form of tax concession to boost flagging residential property sales.
Seeff Property Group chair Samuel Seeff says it is high time that the government provided relief for upper-end homebuyers in particular.
He says lower rates in terms of either transfer duties or CGT could have boosted transaction volumes, which would have meant higher income for the fiscus.
Seeff says there has been a notable decline in buying at the top end of the market over the past three years and wealthy buyers are also spending less per transaction compared with the mid-to late-2000s.
"The property sector is overtaxed. You’ve got transfer duty, agent’s fees, lawyers and CGT. In some instances the transaction costs can run as high as 20% of the purchase price," he says.
It’s not surprising that the government has ignored calls for further transfer duty concessions, given the pressure on its revenue derived from housing sales.
Transfer duty collection for the 2018/2019 tax year amounted to R7.53bn, which is 2.5% less than the R7.72bn collected the previous year and nearly 10% below the estimated R8.34bn that the Treasury hoped to earn. The 2017/2018 figure itself was short of the R8.42bn that the government forecast.
It remains to be seen if the Treasury will meet its estimated R8.06bn target for the 2019/2020 tax year.
John Loos, property sector strategist at FNB commercial property finance, says housing activity is only likely to pick up this year if the economy improves.
"It’s the big macro fiscal numbers that really matter for the property sector now," Loos says.