Budget 2020: Good news on transfer duty a boost for property market

The real estate industry has enthusiastically welcomed the Budget Speech announcement by Finance Minister Tito Mboweni that no transfer duty will be payable on the purchase of property valued at under R1 million. Industry executives believe it will boost the stagnant property market and benefit those looking to get their foot on the first rung of the property ownership ladder.

“The brackets to calculate transfer duties on the sale of property, last adjusted in 2017, will be adjusted for inflation from 1 March 2020. No transfer duty will be liable on the purchase of property with a value below R1 million,” Mboweni told Parliament on 26 February.

Average price paid by first-time home buyer exceeds R1m

Pam Golding Property group CEO Dr Andre Golding said the announcement was timely as the average price paid for a home by a first-time buyer broke the R1 million barrier for the first time in January 2020. According to statistics supplied by leading bond originator Ooba, the average price was R1 001 275.

“While first-time buyers currently account for about half of all mortgages currently facilitated by Ooba, affordability has tended to dampen potential demand. The 2020 Budget goes some way towards addressing this,” Golding stated.

“The increase in the transfer duty threshold provides a very positive incentive not only for first-time home buyers, but also others seeking affordably priced homes – a sector which represents a key driver in the current market.

“It will help stimulate property transactions in this price band, increasing volumes and creating a ripple effect across the market in general – which will in turn benefit government income generation.”

Positive impact on stagnant market

Digital real estate agent PropertyFox CEO Crispin Inglis said the budget was generally positive for the sector. 

“Not only are individuals going to be receiving some personal income tax relief, but the no-transfer duties will give many an opportunity to get a foot in the property door. Ramping up these opportunities for first-time buyers, especially, could have an important impact on a pervasively stagnant property market,” he observed.

Seeff Property Group chairperson Samuel Seeff believes the current market now offers outstanding conditions for property buyers. 

“It is easier to obtain mortgage loans and the banks are granting higher bonds, especially for first-time buyers. There is now more stock to choose from and, generally, sellers have become more negotiable,” he said.

Seeff expects that sellers in the low- to middle-income price ranges, up to about R1.5 million, are likely to see higher price growth. But above that, it will be highly area dependent.

Upper-end property above R5 million is likely to continue seeing flat price growth.

What will transfer costs above R1m be?

According to a media statement by the South African government news agency, SA News, consumers buying property valued between R1 000 001 and R1 375 000 will be liable to transfer duty costs of 3% of the property value.

Those purchasing a property between R1 375 001 to R1 925 000 will be charged R11 250 plus 6% of the total value of the property in transfer costs.

“The National Treasury said R44 250 plus 6% will be charged on property valued above R1 925 000; while those buying property north of R2 475 000 will part with R88 250 and an additional 11% in transfer duties,” SA News reported.

“Wealthy spenders acquiring property valued above R11 million — such as those in the leafy neighbourhoods of Bishopscourt in Cape Town and Hyde Park in Johannesburg — will part ways with transfer duties of just over R1 million, plus 13% of the value of the property.”