The 2008/2009 Budget Speech

Industry Comment by Theuns Hanekom - SAMO

The 2008/2009 Budget Speech – good, bad or any news at all for the property market?

With the recent increases in interest rates, I am sure that everybody waited in great anticipation for Minister Manuel’s budget speech on the 20th of February 2008 to see if there were any tax relief on offer in the property sector. But, contrary to the hopes of many, there was very little in the budget speech relating to the property market. Although the budget speech did not contain any bad news for the property industry, I suppose this might be seen by many as good news. Or should the absence of any good news in the budget speech be seen as bad news? Or even no news at all?

Significant for those of us in the property industry is that transfer duty remains unchanged. According to Minister Manuel, one of the major reasons for this was the fact that government does not want to encourage speculative activity in the property market.

The current transfer duty rates are as follow:
For natural persons:
For property values between R0 – R 500 000 = 0% transfer duty.
For property values between R 500 001 – R 1 000 000 = 5% transfer duty on the value above R 500 000.
For property values between R 1 000 001 and above = R 25 000 plus 8% on the value above R 1 000 000.

For companies and trusts:
Transfer duty set at 8% on the value of the property.

In the 2006/2007 budget speech, the adjustments to the transfer duty thresholds were introduced in an attempt by Government to afford lower income earners the opportunity to enter the homeowners market. By moving the 0% threshold up to properties costing less than R 500 000, many people benefited who could not previously afford the transfer duty which had to be paid upfront in cash. However, due to the continual rise in house prices over the past few years and a general expectation that house prices will continue to grow, together with the continual demand for housing, a cut in transfer duty on property was certainly expected by many role players in the property market. One can possibly also argue that the sharp increase in house prices during the past 2 years have almost totally negated the savings brought about by the 2006/2007 transfer duty cuts.

Fortunately, there remains a glimmer of hope for those in the low-income market. Government and other stakeholders in the property industry acknowledged that there is still a huge demand for and challenge in providing affordable housing in the low-income market. New avenues are being explored whereby further incentives could be afforded to employees, developers and other role players in providing low-income housing to their employees. The existing threshold limit for low-cost housing allowances, currently at an R 6 000 deductible limit, will be reviewed.

And lastly, no article on the budget can go without reference being made to Eskom. Many of you, who are involved with developers and developments, might have heard of the problems in getting power supply to new property developments. The failure of Eskom in supplying or even their inability to guarantee the supply electricity to these new developments is obviously not helping the supply of much needed property stock to the market. We trust that the R60 billion added to the Eskom budget will be spent wisely to ensure that we all receive sufficient electricity, one of our most basic necessities, to continue running our respective businesses.

After all has been said and done, the question still remains: is no news good news, or is the lack of good news necessarily bad news? Or is it simply a case of no news at all?