Post Budget Speech comments from Herschel Jawitz
Herschel Jawitz CEO of Jawitz Properties says that the impact on the residential market from the budget will be mixed.
The increase in the threshold below which transfer duty is not payable by 20% from R750 000 to R900 000 is an exciting move by Treasury to encourage home ownership especially for first time buyers. The 20% increase is way above the growth in property prices and will provide transfer duty relief of up to R4500 for buyers at the R900 000 level. At this level of the market, R4500 is a meaningful amount which will pay towards other transaction costs which is very positive. Very often first time buyers qualify from an affordability point of view but don’t have enough for the transaction fees or deposit to buy a property. This will make a difference.
As expected, there are no further changes in the higher thresholds or transfer duty percentages and no change to the R2 million rand exemption on CGT for a primary residence however the maximum rate of CGT for individuals and other trusts have increased to 18% and 36% respectively. This is in line with a trend from Treasury to discourage ownership of property and other assets in a trust.
What has been increased is the withholding tax on non residents’ disposal of property from 5% to 7.5% however one would expect this to have little impact on the demand for property by non-residents.
The overall budget is as expected with very little tax income tax relief and a higher tax burden for high income earners with the introduction of a new marginal tax rate of 45% above R1. 5 million and a significant increase in dividend withholding tax by 33% to 20%. With disposable income already under pressure, the income tax relief which does not even keep up with inflation will keep consumers under pressure in the year ahead and may impact negatively on marginal home buyers.
The real key to the effectiveness of the budget will be its ability to stimulate economic growth, to reduce social and economic inequality and for the money to be spent effectively and not wasted though corruption.