The Budget: “Increase in transfer duty would dilute revenue collection”
With local and international attention focused on South Africa’s National Budget tomorrow (Wednesday 24 February 2016), from a property market perspective it is hoped that the imperative to increase overall revenue collection will not result in a further increase in transfer duties on property transactions, says Dr Andrew Golding, CE of the Pam Golding Property group.
“While last year’s increase in the threshold for transfer duty to R750 000 and below (versus the previous R600 000 threshold) was positive, as was the decrease in transfer duty on transactions between R750 000 and R2.25 million, a move to increase transfer duty would serve to dampen a property market already beset by rising municipal rates and other costs inherent in owning a property, as well as the rising trend in both interest rates and inflation, and the overall impact of a sluggish economy.
“Last year saw a rise in transfer duty relating to property transactions above the R2.25m million mark – a sector which is also not impervious to the knock-on effects of constantly rising electricity, food and fuel costs and other inflationary impacts.
“The fact is, a large portion of sales in the property market are transacted in the price band up to around R3 million, so it stands to reason that raising transfer duties would not only serve to dilute sales but ultimately also revenue collection.
“This is at a time when an injection of improved economic sentiment would be welcome in order to boost market confidence and drive activity in the property market, and which is seen against the backdrop of gradually increasing interest rates. Equally important is a focus on creating an investor-friendly environment and achieving sustainable economic growth.
“By the same token it is imperative that those in the lower income groups remain encouraged to invest in ownership of their own homes, thereby fostering a culture of saving.
“Encouraging, however, has been the recent engagements between government and business leaders to discuss strategies to stimulate growth and revive investor confidence.”