The South African budget was announced this week and changes have been made to the transfer duty payable on property purchases. It is designed to boost the residential property market for properties costing less than 1.5 million Rand.
Previously companies and trusts buying into the residential market had to pay a flat rate of 8%, but this new sliding scale will make properties less than 1.5 million Rand a lot more attractive, as corporate investors used to concentrate on the commercial sector.
There will now be no transfer duty payable on properties costing less than 600,000 Rand, which is a big change to the R40, 000 that was previously payable. The transfer duty on properties costing between R600, 000 and R1 million is now 3%, with this being the same for companies and individuals.
Properties costing more than R1 million will be liable for 5% on the value exceeding 1 million, plus an additional R12, 000. Properties costing more than R 1.5 million will still be liable for a transfer duty of R37, 000 plus 8% of the value of the property exceeding R1.5 million.
The residential property market in South Africa is expected to improve slowly, with a growth in mortgage finance expected to continue. There are predictions of 4% increase in the economy, which combined with increased employment levels and disposable income growth are expected to support the housing market this year, especially while interest rates remain low.
The economy grew by 2.8% in 2010, and citizens enjoyed high wage increases and low consumer price inflation.