Call for Review of Property Laws

Push for First Time Buyer Concessions

Jeanne van Jarsveldt, financial director of RE/MAX Southern Africa has indicated that a serious review of the law is needed to stimulate the property market and encourage first time buyers to invest. He would like to see the current threshold on payment of transfer duty to be enforced on sales over R1 million and this should be accompanied by tax breaks for first time buyers.

A “rescue package from government” seems to be what is needed in order to avoid further distress in the South African property market. Van Jaarsveldt said that the US anchored its recently launched Housing Stimulus Bill around a tax break of over R52 000 for first time buyers in an effort to stabilize the flailing market.

A similar tax concession in South Africa would go along way towards relieving some of the pressure on affordability for first time buyers, who are trapped by the five percentage point interest rate increases over the last two years.

Van Jaarsveldt also believes that a temporary suspension of transfer duty on all price categories is worth considering, at least until the market has begun to recover. He indicated that the Real Estate Institute of Australia is pressuring the government for an exemption from stamp duty on first time buyer transactions, as well as on retirees downsizing their properties. The same is happening with Britain’s National Association of Estate Agents in the UK.

According to economists, abolishing transfer tax would cause the treasury to lose around R10 billion a year, which would not make too much of a dent in the government’s budget, but would certainly ease the buying and selling of homes.

Mike Bennet, head of ProProp Franchising Group, agrees with van Jaarsveldt in his call for a temporary suspension of all transfer duty on sales under R1 million until the market starts to improve and would also like to see banks given permission to relax the National Credit Act rules on houses selling for less than R700 000.

Van Jaarsveldt refers to the property market as “a pillar of our economy” and believes that the current high number of negatives surrounding the market make it absolutely crucial that some concession be made in order to stimulate home ownership.

He said, “To ignore the situation seriously jeopardizes the growth of the emergent black middle class who we all know are vital at this stage of our country’s transformation”.

The information in this article is courtesy of Jeanne van Jaarsveldt (“First-time buyers need a break – ReMax”, Business Report, 17 September 2008).

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