2018/19 Budget Highlights – How It Affects the South African Property Market

The property sector which has been under fairly severe strain during the last year due to affordability issues as well as the national economy which has been struggling to grow, will definitely be relief that the estate duties percentages payable would remain the same – not adding another extra cost factor to a property transaction.

Government will raise the lion’s share of the R36 billion in additional taxes in 2018/19 through a one percentage point hike in the VAT rate and below-inflation adjustments to personal income tax brackets . The 1% raise in VAT is expected to contribute roughly R23 billion to the fiscus.

The 1% raising of VAT will has a fairly small influence on private individuals selling property transactions.

E.g.: VAT on the R16 000 transfer fees (payable to the conveyancers) on a R1 million transaction is at present R2 240 and will increase to R2 400.

VAT is also payable on estate agent’s commission. The average commission on a transaction is nowadays about 5% - which relays to R50 000 on the R1 million property.

VAT on this price / commission example will therefore increase from be R7 000 to R7 500.

While there has been much speculation about the introduction of a wealth tax – potentially a land tax or annual net wealth tax – no explicit announcement was made in this regard.

22 Feb 2018
Author SARS