While the transfer duty and taxes on property sales have dropped the reality is that banks are still being too strict when asked to lend money.
More and more estate agencies are calling on banks to ease up on their tough lending criteria in order to stimulate the property market and Lanice Steward managing director of Anne Porter Knight Frank claims that the National Credit Act is being applied with “unreasonable stringency”.
She says that the reductions in transfer duty on properties – announced by Finance Minister Pravin Gordhan in his budget speech earlier this year – will help to stimulate the property market.
“But these measures will be of relatively little effect unless they are accompanied by a less stringent approach to individual home loans by the banking groups,” she says.
In terms of the new transfer tax laws, no duty is payable on homes priced up to R600k. On sales of between R600k and R1m transfer duty of 3% is charged on the amount exceeding R600k (in other words on R400k).
On sales of between R1m and R1,5m, a basic fee of R12k is payable plus 5% of the amount exceeding R1m
For more expensive properties that cost more than R1,5m, a tariff of R37k plus 8% of the amount exceeding R1,5m is payable.
“The savings for buyers are significant,” says Steward. “For instance on a home costing R1m, the new tariff of R12k represents a saving of R68k for the buyer. On a home costing R1,5m the saving is R83k because the tax is R37k compared with the previous figure of R120k” says Steward.
The transfer duty on a home costing R30m now amounts to R157k compared with about R240k under the previous tariffs. “These savings are really significant – but are meaningless until the property market picks up and people actually starting buying homes,” says Steward.
She says that the savings are theoretical until a property is sold and unless banks ease up on the strict lending criteria they impose on buyers, the property market will remain in the doldrums with comparatively few sales a month being recorded in cities around the country.
“The banks’ attitude on home loans for self-employed people is particularly negative. They are penalising the entrepreneurs and small, medium and micro enterprises and yet it is these business sectors that will play a fundamental role in building the South African economy,” says Steward.
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