Good news for South African first-time home buyers

Transfer duties in South Africa have been reduced, which is excellent news for first-time purchasers.

Finance Minister Enoch Godongwana stated during his budget speech on Wednesday, 22 February, that the transfer duty rates will be hiked by 10%.

Transfer charges of 3% of the amount exceeding R1 million will be levied on properties sold for R1,000,001 to R1,375,000 until February 28, 2023.

There will be no transfer duties on properties worth between R1 million and R1.1 million as of 1 March 2023. Instead, properties priced between R1,100,001 and R1,512,500 will be subject to a 3% surcharge on the amount over R1.1 million.

The first R1.1 million of any property purchase price is effectively tax-free.

Berry Everitt, CEO of the Chas Everitt International property company, stated that the reforms will benefit and encourage first-time buyers, while Carl Coetzee, CEO of BetterBond, stated that the move would assist many more individuals in getting a foot on the property ladder.

Prior to the budget, property association Seeff lobbied for a rise in the house price threshold for exemption from transfer duty, which had been set at R1 million for more than two years.

“For the price bands above R5 million, an increase in sales volumes can generate significantly more income for the economy and fiscus. You have to sell many more homes at R1 million to generate the direct and indirect economic benefits that a R10 million or R20 million-plus sale does,” it said.

While income projections were greater than projected, Godogwana did not disclose any substantial tax measures during his budget address.

Tax revenue collections for 2022/23 are estimated to amount R1.69 trillion, surpassing the Budget forecast by R93.7 billion and the entire Long Term Budget Policy Statement estimate by R10.3 billion.

“The improvement in revenue is due to higher collection in corporate and personal income taxes, and in customs duties. This partially offset the lower value-added tax estimates.”

“Our country is reaping the benefits of a more efficient and effective tax administration, that is building trust to increase voluntary compliance and boost revenue collections,” Godogwana said.

The following are the transfer duty modifications (as reported by Adams & Adams):

Apart from the adjustments to transfer duties, property experts praised the news of a solar incentive for homes wishing to install solar panels.

Households that install solar panels will be eligible for a 25% discount on the cost of the panels, up to a maximum of R15,000. While others questioned whether the refund would be effective enough, especially given the high cost of solar, it was widely seen as a move in the right direction.

The property and real estate sectors expressed hope that the government will eventually extend the refund or create a new incentive for batteries and inverters, which account for a larger portion of the cost of solar systems.

Solar systems are becoming a crucial value-add for houses, with many purchasers searching for backups and other methods to reduce the country’s constant load shedding.