No tax on pre-owned properties of R900 000 and less

2017-07-27 06:01

Buying a newly-built home has many attractions, but for most first-time homebuyers, saving tax is no longer one of them.

For many years, one of the biggest incentives to buy off-plan or into newly completed developments has been the fact that the “price you see is the price you pay”, with VAT being built into the sale price and buyers thus not being required to find additional cash to cover transfer duty.

“However, with the transfer duty threshold currently at R900 000, that is simply no longer true for many first-time buyers, who are currently paying an average purchase price of around R750 000 to R800 000. The truth is that there is now no tax at all payable on pre-owned properties costing less than R900 000, but still 14% payable on newly-built homes in this price bracket.

In other words, those buying the new homes will effectively be getting 14% less floorspace for their money than those who buy pre-owned homes – and will usually still have to come up with some cash to cover the additional transaction costs such as legal fees and bond registration fees, which are the same for both types of property.

Meanwhile, owing to the fact that building costs continue to increase at more than twice the rate of inflation, newly-built homes are currently at least 30% more expensive than pre-owned homes of the same size.

Looked at another way, newly-built homes are likely to be at least 30% smaller than pre-owned homes at the same price point.

This means that those buying for less than R900 000 could be getting as much as 44% more floorspace when they buy a pre-owned home instead of a newly-built one – and we believe this has much to do with the current resurgence of interest in many of the older and lower-priced suburbs in our cities.

There is a huge interest among young buyers in older city centre apartments that are inevitably more spacious than newly-developed ones.

“Many of these buyers are also happy to buy homes that are in less than perfect condition and renovate them over time, in return for a lower price and a convenient location. They are bringing a new energy to these areas and are often also prepared to get involved in community efforts to improve and secure their neighbourhoods.

“We see this as a healthy, positive trend that will help to reverse the decay that has taken place in many inner suburbs , and to preserve and increase the value of the housing stock in those areas.”

Issued by Chas Everitt International

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