Young first-time buyers and single women are among those who will benefit most from the government’s decision to increase the transfer duty threshold, says Bradd Bendall, BetterBond’s National Head of Sales.
“The adjustment of the transfer duty threshold from R1.1 million to R1.21 million may seem like a marginal change, but it will have a significant impact on affordability and buyers’ ability to invest in property. It will particularly have an impact on younger buyers who may not have the financial capacity to pay transfer duties and also save for a deposit before applying for a bond.”
The current average age of first-time buyers, according to BetterBond’s data, is 37. A few years ago, the average age was around 33, which shows that potential buyers are waiting longer to buy a home as they work on consolidating their finances before committing to bond repayments, adds Bendall. “Affordability is one of the reasons why many South Africans are taking longer to buy their first home, with many opting to rent until they are in a position to afford the hefty transfer duties associated with a bond.”
As the Absa Homeowner Sentiment Index, first-time buyers are more positive than other segments about the future of South Africa’s property market. As a result, the percentage of potential buyers who would rather buy than rent increased by 4% to 77% for the period under review. Interestingly, the Index also notes that in the last quarter of 2024, more single women are among first-time buyers. A higher transfer threshold will count in these buyers’ favour, making it possible for more women to also enter the property market.
With the adjusted threshold buyers will only need to pay a transfer duty of upwards of R3 300 if they buy a home of R1 210 001 or more. Transfer duty is the tax levied on immovable property and it can add significantly to the overall cost of a new home. It is calculated progressively on a sliding scale so for instance, on a property of between R1.21 million and R1.663 800, the buyer will pay 3% on the portion exceeding R1.21 million. The rates increase as the property value rises, with higher-value properties subject to higher transfer duty percentages, says Bendall.
The transfer duty adjustment will provide welcome impetus to first-time buyer activity, which has already shown significant improvement during the first two months of the year. While overall house prices dropped by 0.5% year on year, as reported in BetterBond’s latest March Property Brief, house prices for first-time buyers increased by 2.5%. This points to the considerable demand in this important segment of the market.” Over the past five years, prices have increased at an annual rate of 5.5% for all buyers, and by 6% for first-time buyers – well above inflation.
Source: BetterBond Property Brief, March 2025
“The latest FNB Residential Property Barometer reports that first-time buyers account for a quarter of all home sales, compared to 20% a year. This emphasises the importance of this segment of the market in ensuring that the residential property market remains buoyant,” says Bendall. “Three consecutive cuts in the prime lending rate have certainly made property investment more affordable for more first-time buyers and this decision to also increase the transfer duty threshold by 10% to compensate for inflation will certainly encourage more aspirant buyers to enter the market.”
For those wanting to spend no more than R1.21 million on their first home, the adjusted threshold offers some welcome incentive to take the leap, he adds. “According to BetterBond’s data, the average house price for first-time buyers is R1.3 million, so many prospective homeowners buying for less than R1.21 million will benefit from the new threshold as their upfront costs will be significantly less.”
Further good news for first-time homebuyers is the lowering of deposits required for access to a bond, adds Bendall. In January and February, deposits for all buyers dropped by 4.2% quarter on quarter, and by an even larger margin at 6.8% year on year. For first-time buyers, the average deposit required also dropped marginally quarter on quarter. “Lower interest rates mean that households have more disposable income which makes homeownership more accessible,” notes Bendall.
This, coupled with the lower deposits required for first-time buyers, means more younger buyers and single women will be able to invest in their first homes. “As a result, we are starting to see a modest upward trend in the share of home loans being granted to first-time buyers, and the new transfer duty threshold will certainly provide further incentive to this important segment of the market.”
