Home is where the saving is

Buyers of properties costing up to R900,000 will benefit most, but even the well-heeled will see a small saving

From March 1, home buyers won’t pay a cent in transfer duties when they acquire a property priced up to R900,000, up from the previous exemption threshold of R750,000.

At present, transfer duty of 3% on the property value between R750,000 and R900,000 applies. In other words, if you bought a R900,000 house a month ago, your transfer duty liability would have been R4,500.

The unexpected adjustment in the transfer duty threshold will no doubt provide welcome relief to firsttime and middle-income home buyers.

It is also in line with the overall focus of this year’s budget, which is largely supportive of poor and workingclass families.

Though buyers in the sub-R900,000 bracket will be the biggest winners from this year’s transfer duty adjustments, people who buy homes for R1.25m and more will also make a saving, albeit a marginal one.

Effectively, from March 1 all home buyers will save R4,500 in transfer duties, irrespective of whether they have paid R1,5m or R15m for their abode.

Finance minister Pravin Gordhan expects the changes to the transfer duty rates to lead to a drop in revenue of R448m in 2017/2018, bringing government’s estimated collection from transfer duty to R8.42bn.

That’s an increase of less than 3% on the R8.25bn earned in 2016/2017.

However, government raked in R250m more than it expected in transfer duty revenue in 2016/2017, no doubt on the back of last year’s sizeable hike in transfer duties on luxury homes priced above R10m. Gordhan last year raised the transfer duty rate on such homes from 11% to 13% plus R937,500.

That meant a well-heeled buyer who spent R15m on a luxury abode incurred a hefty R100,000 more in transfer duties than a year earlier.

Moreover, last year was the second year running that upper-income home buyers were hit by transfer duty hikes.

In the 2015 budget, the transfer duty on properties priced at more than R2.25m was raised to 11% of the value, plus R85,000 — up sharply from the previous limit of 8% on houses valued at more than R1.5m.

Estate agents have welcomed this year’s transfer duty changes.

“The raising of the exemption threshold to R900,000 will certainly enable more first-time home buyers to get onto the property ladder,” says Seeff Property group chairman Samuel Seeff.