21 Apr 2020 by: Property24.com
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The recent 1% drop in the interest rate is an historical low as the prime lending rate was last at 7.75% in 1973. It now allows for significant savings, particularly in the long term.
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Any measures that seek to stimulate the market and ease the financial burden on the consumer’s pocket is a step in the right direction to buoy the property market. But while the drop in the repo rate is a good start, additional strategies will need to be put in place to secure the long-term survival of the industry. "One such measure could be to suspend the transfer duty on property valued up to a certain amount," suggest Coetzee.
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He is calling for a six-month window to raising the threshold on transfer duty, which currently stands at R1 million, to R3 million, "could mitigate the risk of the industry contracting significantly as we start, what is sure to be, a slow economic recovery". Transfer costs can be as much as R 189 211 on a bond of R3m - click here to calculate your bond costs.
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'Financial means equals tax on earnings'
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"The savings to the buyer could mean the difference between both the confidence and the financial means to buy property, while government’s loss of income is set to be relatively low over the proposed six-month period. Government revenue is likely to be matched by the benefits gained on collecting tax on the earnings of all players within the property industry, and even the capital gains payable on properties sold, if such a stimulus measure were to be implemented.
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Coetzee also highlighted the need to keep the property sector ticking over by reopening the deeds offices around the country for the remainder of the lockdown, "albeit at reduced capacity".
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Better Bond together with other key industry stakeholders have petition the Minister of Department of Trade and Industry (DTI) Ebrahim Patel and members of the National Command Council requesting certain real estate related services be declared essential and reinstatement of these services. To date, DTI has written back to acknowledge receipt and had stated that the request is being considered.
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"With the deeds offices closed, thousands of transactions are placed on hold, which effectively means a loss of income for thousands more who are directly and indirectly involved in related sectors and services. Furthermore, the backlog that will have to be cleared when it does reopen will add additional strain.
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"In a typical month in South Africa, between 10 000 and 12 000 bonds are registered in the deeds office and, as a sector, property contributes significantly to the GDP, supported by the fact that the deeds office processed R12 billion in registrations in April 2019.
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"We call on government to give urgent consideration to these two proposals. While the lowering of interest rates is likely to provide some much-needed stimulus to the economy and the property sector in particular, more is required. The added benefit is that revenue collection for the fiscus will no doubt be positively impacted through the knock-on effects of such measures," says Coetzee.
See here: SA reserve Bank cut rates to record low
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Core concerns in the petition are for many families that are “unable to access the finance’ they were relying on due to the Deeds Office closure, those "possibly homeless due to being between transactions", as well as “thousands of real estate practitioners whose income has been reduced to zero during this period”.
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Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett says should the full opening not be possible, the National Command Council should "at least authorise the reinstatement of the services required to process already concluded real estate transactions”.
This will not require any customer-based face to face interaction, he adds - despite the industry using innovative digital technology to reduce the need for person to person contact.
“This will enable families who find themselves in a state of flux to conclude their transactions,” he adds.
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