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Johannesburg - The increase in the transfer duty threshold from R500 000 to R600 000 announced in last month’s budget may seem insignificant at first glance.
But it becomes more meaningful considering how the housing slump has already cost the government R3bn in lost tax revenues over the past five years.
Granted, latest figures from the Treasury show South Africans have slowly but surely again begun buying homes, with transfer duty revenues up 17.4% to R5.5bn in the 12 months to end-February 2011.
But that’s still 35% down on the R8.51bn reaped by the government at the height of the property boom in the year to end-February 2006.
If the government’s estimates are anything to go by, housing activity is unlikely to get back to the pre-recession peaks anytime soon.
The Treasury expects transfer duty revenues to drop by R150m (or -2.7%) in the 2011/2012 tax year, although next year’s decline will no doubt be partially due to the tax-exempt threshold being raised by R100 000.
In the two tax years that follow (1 March 2012 to end-February 2014), transfer duty revenues are expected to recover 37.4% to R7.54bn – markedly higher than last year’s R5.5bn but still R1bn off the 2006 peak of R8.51bn.
It’s the first time the government has introduced amendments to the transfer duty rate structure since 2006, when the tax-exempt threshold was increased from R190 000 to R500 000.
The new transfer duty rates mean all homebuyers (individuals, companies and trusts) will owe the Treasury 3% of the buying price between R600 001 and R1m, R12 000 plus 5% of the value between R1m and R1.5m and R37 000 plus 8% of the value above R1.5m.
It remains to be seen how many additional homebuyers will be lured into the market on the back of those concessions.
Although the transfer duty saving on the average priced house – taking Absa’s current average of R966 500 as a benchmark – at almost R13 000 isn’t insubstantial, the total cash reserve now required to buy a property will no doubt keep homeownership out of the reach of many.
Latest data from mortgage originator ooba shows that in January this year banks still required prospective homebuyers to pay a cash deposit of an average 15% of the buying price, which translates into a hefty R145 000 if Absa’s R966 500 is again taken as a benchmark.
Transfer duties (new rates) plus mortgage registration costs and legal fees come to R42 745, according to ooba’s calculations. That means the average consumer still needs to save R188 000 before he can enter the housing market.
• This article was first published in Finweek.
• To read more Finweek articles, click here.
But it becomes more meaningful considering how the housing slump has already cost the government R3bn in lost tax revenues over the past five years.
Granted, latest figures from the Treasury show South Africans have slowly but surely again begun buying homes, with transfer duty revenues up 17.4% to R5.5bn in the 12 months to end-February 2011.
But that’s still 35% down on the R8.51bn reaped by the government at the height of the property boom in the year to end-February 2006.
If the government’s estimates are anything to go by, housing activity is unlikely to get back to the pre-recession peaks anytime soon.
The Treasury expects transfer duty revenues to drop by R150m (or -2.7%) in the 2011/2012 tax year, although next year’s decline will no doubt be partially due to the tax-exempt threshold being raised by R100 000.
In the two tax years that follow (1 March 2012 to end-February 2014), transfer duty revenues are expected to recover 37.4% to R7.54bn – markedly higher than last year’s R5.5bn but still R1bn off the 2006 peak of R8.51bn.
It’s the first time the government has introduced amendments to the transfer duty rate structure since 2006, when the tax-exempt threshold was increased from R190 000 to R500 000.
The new transfer duty rates mean all homebuyers (individuals, companies and trusts) will owe the Treasury 3% of the buying price between R600 001 and R1m, R12 000 plus 5% of the value between R1m and R1.5m and R37 000 plus 8% of the value above R1.5m.
It remains to be seen how many additional homebuyers will be lured into the market on the back of those concessions.
Although the transfer duty saving on the average priced house – taking Absa’s current average of R966 500 as a benchmark – at almost R13 000 isn’t insubstantial, the total cash reserve now required to buy a property will no doubt keep homeownership out of the reach of many.
Latest data from mortgage originator ooba shows that in January this year banks still required prospective homebuyers to pay a cash deposit of an average 15% of the buying price, which translates into a hefty R145 000 if Absa’s R966 500 is again taken as a benchmark.
Transfer duties (new rates) plus mortgage registration costs and legal fees come to R42 745, according to ooba’s calculations. That means the average consumer still needs to save R188 000 before he can enter the housing market.
• This article was first published in Finweek.
• To read more Finweek articles, click here.
