Budget : Transfer duty threshold should be bumped to R1m

Budget : Transfer duty threshold should be bumped to R1m

According to South Africa's biggest mortgage originator, the transfer duty threshold should be bumped up to R1m rand in this year's budget to make home buying easier for thousands of South Africans that have effectively been shut out of the market because of banks' stringent lending criteria.

The current threshold for transfer duty is R500 000.

Speaking ahead of this year's budget announcement, Saul Geffen, chief executive of ooba, (formerly MortgageSA) said that people wanting to buy a home while the market is soft are facing tough times.

Geffen notes that banks' recent tightening up of lending has compounded the troubles in the housing market. "Banks have introduced much stricter lending criteria and fewer buyers are qualifying for the full amount of the loan they apply for."

When banks do grant loans, they are demanding deposits of up to 30% depending on the size of loan. On top of the deposit, buyers must then pay transfer duty (a tax) which means buyers need to have a lot of cash on hand.

"Lowering the transfer duty threshold would make it easier for consumers, particularly first-time buyers, to enter the property market."

Geffen noted that Finance Minister Trevor Manual increased the threshold at which transfer duty on fixed property becomes payable from R190 000 to R500 000 in 2006 but that three years on, it needed to be raised again.

"In early 2006, the average property price in South Africa was around R700 000. Now it is just shy of R1m so the threshold also needs to recognize this bracket creep effect and ease the tax burden on South Africans at a time they need it most."

Currently, there is no transfer duty payable on property purchases under R500 000 while 5% transfer duty is payable of the value above R500 000. The duty on transactions above R1m is R25 000 plus 8% of the value above R1m.

Geffen also said that he expected a lot more buyers to come into the market in 2009, especially later this year, as interest rates continued to drop. He also noted that lower inflation would have a positive impact on people's wallets.

"It looks as if 2010 will be a far better year for South African property."

Hello ooba news

The latest oobarometer stats reveal that the average purchase price growth among first-time buyers remains strong at 12.1% in June. This, together with the continued easing in lending criteria, is good news for potential homebuyers in South Africa.

With the property market beginning to show signs of a recovery, it is more important than ever to ensure your home is correctly priced. Jenny Rushin, property finance manager at ooba, SA's leading mortgage originator, said that a property listed at the right price will give sellers the greatest chance of attracting buyers.

South African banks have loosened their lending criteria which has supported a revival in the property market and helped new buyers enter the market says South Africa's leading mortgage originator, ooba.

South Africa's leading bond origination company, ooba, has seen a 55% increase in the value of approved loans from April to September this year, with a 21% surge from August to September alone.

With house price indicators like the oobarometer perking up, smart buyers are slowly returning to the market and need to be armed with how to make the best purchase possible. Ben Seymour-Brown, manager of group direct sales at ooba, said: "We expect more people to return to the property market this year and certainly next as the economy recovers, the effect of lower interest rates is felt and confidence returns to bricks and mortar investment.