Transfer duty and the property market

20 Feb 2012

On 23 February 2011, the South African Finance Minister Pravin Gordhan, raised the transfer duty threshold by R100 000 to R600 000.

Results from the study revealed that property sales increased by 8 percent for natural persons. Looking at people buying property in their personal capacity registered against their ID number at the Deed’s Office, the number of sales in the R500 000 to R600 000 band in the six month period prior to the transfer duty amendment was 6 378 and this rose to 6 879 in the six months post the adjustment, she points out.

According to Lightstone, the 2011 adjustment also changed the ruling to allow juristic entities, i.e. trusts, CC’s and Pty Ltds to also benefit from the R600 000 transfer duty allowance.

Lightstone conducted a study of the impact of amendments to transfer duty in respect of property sales.

Hayley Ivins says in order to understand whether these adjustments had any impact on sales in the property market, they examined the frequency of property sales in the R500 000 to R600 000 price bracket in the six month period pre and post the date of implementation i.e. 23 February 2011.

She says they excluded those transactions that were directly from property developers as they do not carry transfer duty costs and portions of title shares.

The study also looked at sales to natural persons and juristic entities independently. 

Results from the study revealed that property sales increased by 8 percent for natural persons.

Looking at people buying property in their personal capacity registered against their ID number at the Deed’s Office, the number of sales in the R500 000 to R600 000 band in the six month period prior to the transfer duty amendment was 6 378 and this rose to 6 879 in the six months post the adjustment, she points out.

In the case of juristic entities, the study identified a 36 percent lift in property sales between the R500 000 and R600 000 band in the six month period post the announcement, from 635 to 866 sales.

“This indicates that the adjustment served as an impetus for purchases in the names of juristic entities, in the price band exempt of transfer duty.”

Ivins adds that while they do not anticipate a further adjustment to the transfer duty value in Wednesday’s budget speech, the study results indicate that an increase in the minimum value for transfer duty appears to stimulate the appetite of buyers in the value band exempt from transfer costs.

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