An article published by The Times discusses Nedbank chief economist, Dr Dennis Dykes’ view that the current crisis in the US could potentially impact South Africa far less than many other countries around the world.
Dykes argues that countries with extremely high household debt to income ratios, such as the UK and Australia (both currently at 160%) are at a much higher risk than South Africa (at 76%).
“Banks in these countries are reluctant and unable to grant more credit to consumers, which will affect all aspects of these economies, particularly property prices,” according to Dykes. He goes on to say that the current weakness in South African property prices is more likely cyclical than structural.
“In other words, the global crisis is not really the cause of the slowdown in our property market. Higher interest rates, coupled with huge gains in house prices over the last few years, were already having a cooling effect on our property market,” Dykes explains.
He adds that, “There is also a good possibility that interest rates in South Africa will decrease over the next few months, as global and local inflation slows. This will bring confidence back into the local housing market. However, a strong recovery is unlikely in the short term”.
Another factor is that none of the big South African banks have been directly exposed to the subprime market in the US. “Although there could be some counter-party losses resulting from bank failures elsewhere, it is likely that the direct impact will be very minimal,” Dykes notes.
He also says that the consolidation that occurred in the South African banking industry a few years ago left those remaining in the game very strong financially. While it has not been expressly stated by the government, Dykes concludes that it would no doubt back up the banking system should this ever be required.
The information in this article is courtesy of I-Net Bridge (“Crisis shouldn’t hit SA houses: Dykes”, The Times, 8 October 2008).
Buy or sell property in South Africa.
Wednesday, October 8, 2008
Have We Reached the Bottom of the Cycle?
(Accessed from www.realestateweb.co.za on October 7, 2008.)
Real estate veteran Bill Rawson says that while house prices are down, national sales are up dramatically, which suggests that we have reached the bottom of the cycle. Perhaps the most common mistake made by sellers in the current market is to insist on an asking price that is no longer acceptable.
While property prices in the Cape continue to perform better than most other provinces in South Africa, they are still 20% off their peak in 2007. Often when sellers find that the offers they have been receiving reflect this then they enter a state of denial, blame the agent, the advertising or any other factor and refuse to drop below the original asking price.
This tends to leave the property on the market for six to twelve months, after which it is probably below market value due to a certain stigma that it may have picked up. Buyers are generally suspicious of homes that have been on the market for so long, assuming that there is some hidden fault that prevents them from selling.
The right time to drop your asking price is the moment you realize that the price is not going to be accepted. Once you do this, it is highly likely that some of the original potential buyers will regain interest in the property. While it can be emotionally upsetting for a seller to reduce the price on a home when he or she has spent time and money lavishing it with care, buyers are in the best position that they have been for nine years, so it is really no use trying to buck the trend – it almost never works.
The total number of homes on the market has fallen by 20% and the time taken to sell a property is now between twelve and fifteen weeks, which is nearly twice as long as in 2007. Rawson also doesn’t see the situation changing any time soon, although the Reserve Bank’s decision not to raise interest rates seems to have stabilized the market somewhat and probably signals the end of the downturn.
The veteran goes on to say that now is a great time to buy, despite the difficulties in obtaining bond finance. Property is still a top line investment and this has never been truer than in today’s tight market conditions. Consumers have grown overly cautious and negative in the current market climate and its time to dispel these reactions.
Rawson Properties, which has just over 140 franchises across the country, has recovered from a low in May/June to record a 250% increase in sales in September. However, Bill Rawson concedes that this trend is by no means universal and that his company is possibly unique in this aspect. Many smaller agencies are still going under and agents are dwindling, with the national figure down to 55 000 from 85 000.
With the latest political developments, interest may well be likely to decline, but there are questions being raised about the direction the new political leadership will take and exactly how ‘fairness to all’ will play out in terms of the dispensation. So far, it seems to have been handled quite well.
An encouraging sign is that South Africans seem to be more accepting of the new price structures in the property market, which often involves scaling down. Rawson has seen an increase in large deposits recently (up to 30% of the sale price), which also reflects that buyers are scaling down.
Rawson adds that, “Ongoing branding and marketing, with an increased emphasis on sophisticated customer related IT systems, ongoing support for franchisees with training, advice and encouragement and upgrading all of the support systems (again, particularly those that are IT related) are the factors that are taking the Rawson group forward”.
Find property in South Africa.
Real estate veteran Bill Rawson says that while house prices are down, national sales are up dramatically, which suggests that we have reached the bottom of the cycle. Perhaps the most common mistake made by sellers in the current market is to insist on an asking price that is no longer acceptable.
While property prices in the Cape continue to perform better than most other provinces in South Africa, they are still 20% off their peak in 2007. Often when sellers find that the offers they have been receiving reflect this then they enter a state of denial, blame the agent, the advertising or any other factor and refuse to drop below the original asking price.
This tends to leave the property on the market for six to twelve months, after which it is probably below market value due to a certain stigma that it may have picked up. Buyers are generally suspicious of homes that have been on the market for so long, assuming that there is some hidden fault that prevents them from selling.
The right time to drop your asking price is the moment you realize that the price is not going to be accepted. Once you do this, it is highly likely that some of the original potential buyers will regain interest in the property. While it can be emotionally upsetting for a seller to reduce the price on a home when he or she has spent time and money lavishing it with care, buyers are in the best position that they have been for nine years, so it is really no use trying to buck the trend – it almost never works.
The total number of homes on the market has fallen by 20% and the time taken to sell a property is now between twelve and fifteen weeks, which is nearly twice as long as in 2007. Rawson also doesn’t see the situation changing any time soon, although the Reserve Bank’s decision not to raise interest rates seems to have stabilized the market somewhat and probably signals the end of the downturn.
The veteran goes on to say that now is a great time to buy, despite the difficulties in obtaining bond finance. Property is still a top line investment and this has never been truer than in today’s tight market conditions. Consumers have grown overly cautious and negative in the current market climate and its time to dispel these reactions.
Rawson Properties, which has just over 140 franchises across the country, has recovered from a low in May/June to record a 250% increase in sales in September. However, Bill Rawson concedes that this trend is by no means universal and that his company is possibly unique in this aspect. Many smaller agencies are still going under and agents are dwindling, with the national figure down to 55 000 from 85 000.
With the latest political developments, interest may well be likely to decline, but there are questions being raised about the direction the new political leadership will take and exactly how ‘fairness to all’ will play out in terms of the dispensation. So far, it seems to have been handled quite well.
An encouraging sign is that South Africans seem to be more accepting of the new price structures in the property market, which often involves scaling down. Rawson has seen an increase in large deposits recently (up to 30% of the sale price), which also reflects that buyers are scaling down.
Rawson adds that, “Ongoing branding and marketing, with an increased emphasis on sophisticated customer related IT systems, ongoing support for franchisees with training, advice and encouragement and upgrading all of the support systems (again, particularly those that are IT related) are the factors that are taking the Rawson group forward”.
Find property in South Africa.
Tuesday, October 7, 2008
FNB Urges Consumers to be Cautious
Some Encouraging Signs but Beware
A press office feature released by FNB indicates that the risks to property have shifted from interest rates to economic growth and that consumers should heed this latest development. The FNB Property Barometer for the third quarter of 2008 was released on Monday and showed further weakening in levels of demand activity experienced by estate agents.
From a previous level of 4.4 on a scale of 1 to 10 in the second quarter, respondents to the survey indicated a further decline to an average level of activity recorded at 4.1, which is the lowest in the history of the barometer. The average length of time a property stays on the market has also increased from 14 weeks and 6 days to 20 weeks and 1 day in the most recent quarter.
Just 12% of the market comprised first time buyers, which is the lowest percentage on record, while sellers not obtaining their asking price increased from 85% in the previous quarter to 88%. The buy to let sector of the market is also relatively subdued, with a mere 13% of total buyers believed to be buy to let investors.
John Loos, FNB Home Loans Property Strategist, says that looking forward there have been some encouraging signs emerging, which reflect well on the future of the residential market. Most notably, the recent fall in oil prices, which has resulted in domestic fuel price cuts, as well as a softening in global food price inflation. FNB believes that the CPIX inflation rate may well be at its peak.
The onset of an expected decline in inflation would result in inflation having less of an impact on disposable income going forward, while interest rate cuts are anticipated from April 2009. The debt to disposable income ration in the household sector has also started to fall, which suggests that there is some improvement in the ability to service its debt burden.
However, in light of all the encouragement, Loos warns that consumers should not get too excited just yet. The current threat to global economic growth coming out of the US seems to be moving in to replace the previous risks. Loos says that it would be naïve to think that South Africa’s property market and financial sector are not exposed to the potential fallout from the US.
While the bailout plan is currently being implemented by the US government, it still remains to be seen as to how severely the recovery plan is regulated and how strict lending policies to households in the US become in a bid to restore responsible lending practices. The combination of tight lending criteria and falling house prices could have a profound impact on already-low consumer confidence in the US and subsequently on economic growth in the world’s biggest economy.
South Africa is by no means immune to the recessionary conditions and financial strain that may emanate as a result of the current crisis in the US. That being said, FNB’s most likely scenario appears to be one where domestic growth is slower, but remains positive. This would ultimately lead to a recovery in the demand for residential property from next year, as interest rates begin to decline.
South African consumers would do well not to ignore the current global growth risks when making investments going forward. If the crisis in the US gets significantly worse then the local property market will by no means escape unscathed. Loos suggests taking caution with regard to spending and borrowing practices until such time as we have more reliable indications of where the crisis stands. Despite some encouraging inflation and interest rates signs, South Africa is far from being out of the dark just yet.
This information is courtesy of John Loos (“Risks to property shift from interest rates to economic growth – ignore at your peril”, ITInews, 6 October 2008).
Property for sale in South Africa.
A press office feature released by FNB indicates that the risks to property have shifted from interest rates to economic growth and that consumers should heed this latest development. The FNB Property Barometer for the third quarter of 2008 was released on Monday and showed further weakening in levels of demand activity experienced by estate agents.
From a previous level of 4.4 on a scale of 1 to 10 in the second quarter, respondents to the survey indicated a further decline to an average level of activity recorded at 4.1, which is the lowest in the history of the barometer. The average length of time a property stays on the market has also increased from 14 weeks and 6 days to 20 weeks and 1 day in the most recent quarter.
Just 12% of the market comprised first time buyers, which is the lowest percentage on record, while sellers not obtaining their asking price increased from 85% in the previous quarter to 88%. The buy to let sector of the market is also relatively subdued, with a mere 13% of total buyers believed to be buy to let investors.
John Loos, FNB Home Loans Property Strategist, says that looking forward there have been some encouraging signs emerging, which reflect well on the future of the residential market. Most notably, the recent fall in oil prices, which has resulted in domestic fuel price cuts, as well as a softening in global food price inflation. FNB believes that the CPIX inflation rate may well be at its peak.
The onset of an expected decline in inflation would result in inflation having less of an impact on disposable income going forward, while interest rate cuts are anticipated from April 2009. The debt to disposable income ration in the household sector has also started to fall, which suggests that there is some improvement in the ability to service its debt burden.
However, in light of all the encouragement, Loos warns that consumers should not get too excited just yet. The current threat to global economic growth coming out of the US seems to be moving in to replace the previous risks. Loos says that it would be naïve to think that South Africa’s property market and financial sector are not exposed to the potential fallout from the US.
While the bailout plan is currently being implemented by the US government, it still remains to be seen as to how severely the recovery plan is regulated and how strict lending policies to households in the US become in a bid to restore responsible lending practices. The combination of tight lending criteria and falling house prices could have a profound impact on already-low consumer confidence in the US and subsequently on economic growth in the world’s biggest economy.
South Africa is by no means immune to the recessionary conditions and financial strain that may emanate as a result of the current crisis in the US. That being said, FNB’s most likely scenario appears to be one where domestic growth is slower, but remains positive. This would ultimately lead to a recovery in the demand for residential property from next year, as interest rates begin to decline.
South African consumers would do well not to ignore the current global growth risks when making investments going forward. If the crisis in the US gets significantly worse then the local property market will by no means escape unscathed. Loos suggests taking caution with regard to spending and borrowing practices until such time as we have more reliable indications of where the crisis stands. Despite some encouraging inflation and interest rates signs, South Africa is far from being out of the dark just yet.
This information is courtesy of John Loos (“Risks to property shift from interest rates to economic growth – ignore at your peril”, ITInews, 6 October 2008).
Property for sale in South Africa.
Monday, October 6, 2008
Bid to Professionalize Real Estate Industry in South Africa
IEASA Calls on Estate Agents
The South African Institute of Estate Agents (IEASA) has called on all real estate agents practicing in the country to join the institute. This is in a bid to increase the professionalism and responsibility of estate agents in the industry.
By becoming a member of the Institute of Estate Agents (or an MIEA), the agent will be assuring buyers and sellers of a degree of training and qualifications specific to their field. The members are also registered to practice as estate agents and have access to the institute’s widespread support network and services.
IEASA national president, Dr Willie Marais spoke at a recent conference and said, “The Estate Agency Affairs Board has made it plain that it wishes real estate to be regarded as a profession and just an amorphous industry. But that would presuppose that every agent belonged to a professional association – as doctors, lawyers and engineers do. And IEASA is currently the only organization recognized to fulfill that role. Consequently, the time is coming when agents who wish to be recognized as professionals will have to belong to IEASA – and those who don’t will be beyond the pale”.
Currently, only one out of every six estate agents working in South Africa are members of the institute. As the property industry evolves, training is without a doubt a cornerstone for agents who want to make a success out of their business. Dr Marais indicated that it is vital for those who are really serious about the industry to become better educated about all aspects of what their work entails.
IEASA has taken the lead when it comes to ensuring that all of its members are well informed and kept up to date on the terms and developments of property law and its affiliated practices. So if you are an agent practicing in South Africa then perhaps you should consider becoming a member of a professional institution like IEASA.
The information in this article is courtesy of HomesGoFast (“A Call to South Africa Real Estate Agents”, 6 October 2008).
South Africa property for sale.
The South African Institute of Estate Agents (IEASA) has called on all real estate agents practicing in the country to join the institute. This is in a bid to increase the professionalism and responsibility of estate agents in the industry.
By becoming a member of the Institute of Estate Agents (or an MIEA), the agent will be assuring buyers and sellers of a degree of training and qualifications specific to their field. The members are also registered to practice as estate agents and have access to the institute’s widespread support network and services.
IEASA national president, Dr Willie Marais spoke at a recent conference and said, “The Estate Agency Affairs Board has made it plain that it wishes real estate to be regarded as a profession and just an amorphous industry. But that would presuppose that every agent belonged to a professional association – as doctors, lawyers and engineers do. And IEASA is currently the only organization recognized to fulfill that role. Consequently, the time is coming when agents who wish to be recognized as professionals will have to belong to IEASA – and those who don’t will be beyond the pale”.
Currently, only one out of every six estate agents working in South Africa are members of the institute. As the property industry evolves, training is without a doubt a cornerstone for agents who want to make a success out of their business. Dr Marais indicated that it is vital for those who are really serious about the industry to become better educated about all aspects of what their work entails.
IEASA has taken the lead when it comes to ensuring that all of its members are well informed and kept up to date on the terms and developments of property law and its affiliated practices. So if you are an agent practicing in South Africa then perhaps you should consider becoming a member of a professional institution like IEASA.
The information in this article is courtesy of HomesGoFast (“A Call to South Africa Real Estate Agents”, 6 October 2008).
South Africa property for sale.
Thursday, October 2, 2008
House Prices Up in September
Some Life in Property Market
A recent article published by Reuters discusses South African house prices, indicating an increase of 3.6 percent year-on-year in September. This is the first increase in 10 months, reflecting fresh activity in the ailing market after an extremely difficult year.
Standard Bank’s property gauge released on a monthly basis showed an increase in the median house price at R580 000. The five month moving average is still in negative terrain, but has improved year-on-year to –5.5 percent after several months of steadily falling prices.
After sharp declines in May and June, Standard Bank said that the rate of decline slowed in July and August, but indicated that the property sector would remain under pressure until consumer spending starts to recover from its cooling period.
The bank said in a statement that, “The unexpected 3.6 percent increase in September is not seen as a new trend, but rather the result of volatile monthly data. It is anticipated that the index will once again show low or negative growth in the months to come. Nonetheless, the latest data show that there is some life in the property market”.
Household budgets have taken a beating with the enforcement of stricter lending laws and a series of interest rate increases, which has in turn put the housing sector under strain. The central bank increased the repo lending rate by 5 percentage points to 12 percent between June 2006 and June 2008 in a bid to fight inflation.
This house price increase coincides with a slowing in the upward rates cycle in August and market experts predict that the next move in interest rates will be down sometime in 2009. Slowing household spending is evident in falling retail and new vehicle sales and the bank believes that the sector may not recover until this picks up again and interest rates start falling.
“Residential property will remain in the doldrums until such time that fundamental drivers of the market turn for the better and that may be some time off,” according to Standard Bank.
The information in this article is courtesy of Reuters Africa (“S.Africa house prices up, but problems remain”, 2 October 2008).
Buy property in South Africa.
A recent article published by Reuters discusses South African house prices, indicating an increase of 3.6 percent year-on-year in September. This is the first increase in 10 months, reflecting fresh activity in the ailing market after an extremely difficult year.
Standard Bank’s property gauge released on a monthly basis showed an increase in the median house price at R580 000. The five month moving average is still in negative terrain, but has improved year-on-year to –5.5 percent after several months of steadily falling prices.
After sharp declines in May and June, Standard Bank said that the rate of decline slowed in July and August, but indicated that the property sector would remain under pressure until consumer spending starts to recover from its cooling period.
The bank said in a statement that, “The unexpected 3.6 percent increase in September is not seen as a new trend, but rather the result of volatile monthly data. It is anticipated that the index will once again show low or negative growth in the months to come. Nonetheless, the latest data show that there is some life in the property market”.
Household budgets have taken a beating with the enforcement of stricter lending laws and a series of interest rate increases, which has in turn put the housing sector under strain. The central bank increased the repo lending rate by 5 percentage points to 12 percent between June 2006 and June 2008 in a bid to fight inflation.
This house price increase coincides with a slowing in the upward rates cycle in August and market experts predict that the next move in interest rates will be down sometime in 2009. Slowing household spending is evident in falling retail and new vehicle sales and the bank believes that the sector may not recover until this picks up again and interest rates start falling.
“Residential property will remain in the doldrums until such time that fundamental drivers of the market turn for the better and that may be some time off,” according to Standard Bank.
The information in this article is courtesy of Reuters Africa (“S.Africa house prices up, but problems remain”, 2 October 2008).
Buy property in South Africa.
Property Still Not Up to Scratch in SA
FNB has recently indicated that expected job losses are bound to put more pressure on the ailing South African property market. Statistics show that real house prices have dropped by nearly 10% and that a lack of affordability continues to work as a handbrake to the market.
The September FNB House Price Index was released this week and figures showed a slight year-on-year increase at 1.8%, but prices month-on-month are declining at –0.1%. Taking inflation into account, residential property values plummeted by an incredible 9.5%.
This year has seen South African consumers take a beating, with rising interest rates and skyrocketing food and fuel prices. The banks have also tightened their grip on available credit as a result of the National Credit Act, which came into force last year. This has caused a significant drop in the demand for property, as potential buyers struggle to find funding.
Estate agents have reported a dramatic decline in sales volumes and in many instances at least half of what they were in early 2007. There has been an exodus of agents from the market, with the estimate that at least 20 000 are no longer in business compared to the same time last year.
Add to the mix a surplus of sellers, thanks to political uncertainty and government incompetence around Eskom and other issues inspiring a wave of emigration and you have at the very least a buyers’ market, but also something close to a recession in that sector of the economy.
General economic growth has proven disappointing as well, which has led to a shedding of jobs – another development that FNB indicates is not good for the residential property sector. However, FNB property strategist John Loos says that when affordability is measured in terms of average house price/average income, it appears to be improving, but “the catch is that the improvement in affordability refers to those who remain employed throughout the economic downturn”.
Loos went on to say that the economy “may already be at a stage of net job losses in the formal sector and this situation will partly offset any possible improvement in interest in the residential property asset class, as a result of improving affordability for regular income earners”.
“In short, given a slowing economic growth rate and slow real household disposable income growth for the household sector as a whole, we are not necessarily at the stage where an increasing number of people can afford the average priced house,” Loos said. The recent shocks in the stock market led the downturn, but areas in the lower price range may now be deteriorating faster.
Paul Beadle, managing director of Just Money, said that the current financial crisis playing out around the globe affects South African consumers in that the bottom line is there is less money to go around. “This affects businesses that are now struggling because their stock value has fallen or because the cannot find the additional investment they need to grow. It also means that many banks are unwilling to lend cash because of the greater risks now involved”.
Beadle also said that South African banks are “actually in good shape because they had limited exposure to the credit problems in the US that caused this crisis”. Nevertheless, investors on the global market are extremely wary of risk, so they are going to be cautious when it comes to investing in emerging markets like SA.
This lack of inward investment could have a profound impact on growth and profits of companies in South Africa, which is on top of the ongoing economic concerns and the high cost of living putting more pressure on consumers, said Beadle.
There are some estate agents who report a slight increase in show day visits and sales in recent months. According to Jeanne van Jarsveldt of the RE/MAX Group, “The past three months has seen a steady market recovery and has been the best we have seen on a national level during 2008”.
Loos warned that “early signs of improving household fundamentals are not believed to be sufficient to turn the market around” and that this is anticipated around April next year when the first interest rate cut is expected.
The information in this article is courtesy of Realestateweb (“Property prices: still looking ugly”, 1 October 2008).
South Africa property for sale.
The September FNB House Price Index was released this week and figures showed a slight year-on-year increase at 1.8%, but prices month-on-month are declining at –0.1%. Taking inflation into account, residential property values plummeted by an incredible 9.5%.
This year has seen South African consumers take a beating, with rising interest rates and skyrocketing food and fuel prices. The banks have also tightened their grip on available credit as a result of the National Credit Act, which came into force last year. This has caused a significant drop in the demand for property, as potential buyers struggle to find funding.
Estate agents have reported a dramatic decline in sales volumes and in many instances at least half of what they were in early 2007. There has been an exodus of agents from the market, with the estimate that at least 20 000 are no longer in business compared to the same time last year.
Add to the mix a surplus of sellers, thanks to political uncertainty and government incompetence around Eskom and other issues inspiring a wave of emigration and you have at the very least a buyers’ market, but also something close to a recession in that sector of the economy.
General economic growth has proven disappointing as well, which has led to a shedding of jobs – another development that FNB indicates is not good for the residential property sector. However, FNB property strategist John Loos says that when affordability is measured in terms of average house price/average income, it appears to be improving, but “the catch is that the improvement in affordability refers to those who remain employed throughout the economic downturn”.
Loos went on to say that the economy “may already be at a stage of net job losses in the formal sector and this situation will partly offset any possible improvement in interest in the residential property asset class, as a result of improving affordability for regular income earners”.
“In short, given a slowing economic growth rate and slow real household disposable income growth for the household sector as a whole, we are not necessarily at the stage where an increasing number of people can afford the average priced house,” Loos said. The recent shocks in the stock market led the downturn, but areas in the lower price range may now be deteriorating faster.
Paul Beadle, managing director of Just Money, said that the current financial crisis playing out around the globe affects South African consumers in that the bottom line is there is less money to go around. “This affects businesses that are now struggling because their stock value has fallen or because the cannot find the additional investment they need to grow. It also means that many banks are unwilling to lend cash because of the greater risks now involved”.
Beadle also said that South African banks are “actually in good shape because they had limited exposure to the credit problems in the US that caused this crisis”. Nevertheless, investors on the global market are extremely wary of risk, so they are going to be cautious when it comes to investing in emerging markets like SA.
This lack of inward investment could have a profound impact on growth and profits of companies in South Africa, which is on top of the ongoing economic concerns and the high cost of living putting more pressure on consumers, said Beadle.
There are some estate agents who report a slight increase in show day visits and sales in recent months. According to Jeanne van Jarsveldt of the RE/MAX Group, “The past three months has seen a steady market recovery and has been the best we have seen on a national level during 2008”.
Loos warned that “early signs of improving household fundamentals are not believed to be sufficient to turn the market around” and that this is anticipated around April next year when the first interest rate cut is expected.
The information in this article is courtesy of Realestateweb (“Property prices: still looking ugly”, 1 October 2008).
South Africa property for sale.
Wednesday, October 1, 2008
Why You Need a Tax Number to Buy Property
What SARS Has to do With Property
When it comes to buying your first home, there are a number of things required by various parties that can prove extremely complicated. For instance, the transferring attorneys will ask for your tax number. Now many of you might like to know what on earth SARS has to do with buying property.
The answer is simple: any transfer of immovable property in South Africa gives rise to the payment of transfer duty, which is levied under the Transfer Duty Act. The property cannot be transferred into your name until the transfer duty has been paid or a declaration has been submitted citing that the transaction is exempt. The latter involves purchases by public benefit organizations or property transactions where VAT is charged.
As well as the receipt for transfer duty, the seller needs to fill out a declaration (Form TD1), as does the buyer (Form TD2). The information that is required on these declaration forms includes the income tax numbers of the buyer, seller and estate agent (where applicable).
This can create a problem where the tax compliance records of any party are not up to scratch, which is yet another weapon that SARS has in its armoury. Transfers of property have been known to be put on hold in cases where any one of the parties has not complied with their tax obligations.
Most property transactions have to be registered at the Deeds Office and this cannot take place without a transfer duty receipt or exemption certificate from SARS. However, registration is not necessary where fixed property is registered in the name of a trust, company or close corporation and there is merely a change in beneficiaries, shareholders or members.
SARS thus requires estate agents who are party to such transactions to complete a declaration (Form TD7). This is necessary because the change of ownership here does not require registration of the transfer in the Deeds Office, since technically the ownership of the property itself has not changed. These transactions are still subject to transfer duty however, and in the past many buyers have managed to avoid paying transfer duty by failing to declare the purchase of these shares to SARS.
The information in this article is courtesy of Steven Jones (“Why Sars wants your income tax number when you buy a property”, MoneywebTax, 30 September 2008).
Find property to buy in South Africa.
When it comes to buying your first home, there are a number of things required by various parties that can prove extremely complicated. For instance, the transferring attorneys will ask for your tax number. Now many of you might like to know what on earth SARS has to do with buying property.
The answer is simple: any transfer of immovable property in South Africa gives rise to the payment of transfer duty, which is levied under the Transfer Duty Act. The property cannot be transferred into your name until the transfer duty has been paid or a declaration has been submitted citing that the transaction is exempt. The latter involves purchases by public benefit organizations or property transactions where VAT is charged.
As well as the receipt for transfer duty, the seller needs to fill out a declaration (Form TD1), as does the buyer (Form TD2). The information that is required on these declaration forms includes the income tax numbers of the buyer, seller and estate agent (where applicable).
This can create a problem where the tax compliance records of any party are not up to scratch, which is yet another weapon that SARS has in its armoury. Transfers of property have been known to be put on hold in cases where any one of the parties has not complied with their tax obligations.
Most property transactions have to be registered at the Deeds Office and this cannot take place without a transfer duty receipt or exemption certificate from SARS. However, registration is not necessary where fixed property is registered in the name of a trust, company or close corporation and there is merely a change in beneficiaries, shareholders or members.
SARS thus requires estate agents who are party to such transactions to complete a declaration (Form TD7). This is necessary because the change of ownership here does not require registration of the transfer in the Deeds Office, since technically the ownership of the property itself has not changed. These transactions are still subject to transfer duty however, and in the past many buyers have managed to avoid paying transfer duty by failing to declare the purchase of these shares to SARS.
The information in this article is courtesy of Steven Jones (“Why Sars wants your income tax number when you buy a property”, MoneywebTax, 30 September 2008).
Find property to buy in South Africa.
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