Nick Wilson

PROPERTY market analysts are not expecting surprises for the property market in Finance Minister Trevor Manuel’s budget speech today.

In fact, most analysts believe property will take a back seat, and that the market would be lucky if the treasury decides to increase the exemption levels for transfer duty.

In last year’s budget, the national treasury responded to the steep rise in property prices by raising the threshold for the exemption of transfer duty from R150000 to R190000, while the upper threshold rose from R320000 to R330000. In terms of the upper threshold, you pay a R7000 flat fee for a R330000 house. On residential property above R330000 you pay R7000 plus 8% on value over R330000.

Herschel Jawitz, CEO of real estate group Jawitz Properties, expects the minimum threshold for transfer duty to increase to R250000 because of the property boom, which has seen property prices rocket in recent years. This would mean that a buyer would not pay transfer duty on a property transaction of R250000 or less.

Jawitz said this would benefit the property market at the affordable and lower price level range which falls in the R150000-R350000 band.

He expects a marginal increase in the upper threshold to R350000.

"However," he said "few other transaction costs can be changed by the treasury as stamp duty has already been abolished, unless they introduce a radical move such as a tax-deductible housing allowance for low-income earners." Such a move would provide incentives for low-income earners to buy property, he said.

"Let’s say you’ve got someone earning R7500 a month, which equates to R90000 a year. If government introduces an annual housing allowance of R10000 and you bought a house, that allowance would effectively reduce your taxable income to R80000," Jawitz said.

Pace Property Group MD David Green is not "particularly optimistic" about changes in the budget that could favourably affect property. If there were any, they were likely to relate to transfer duty, he said.

Green said he would like the treasury to raise the exemption on transfer duty to about R350000 or R400000, which was the "entry-level market that first- time buyers are looking at".

He says it would also be positive for the residential property market if Manuel raised the level from which personal income is taxable.

This would leave more disposable income available for people, particularly first-time home buyers.

First National Bank property strategist John Loos says that while the budget holds lots of promise for tax relief, he does not expect much from a property point of view.

"With the property market having boomed for some years, I doubt that major CGT (capital gains tax) exemptions and transfer duty adjustments will be high on the minister’s agenda," he said.

"Nevertheless, indirectly, with the budget being more stimulatory to the economy, there should still be benefits for the strongly performing property market," Loos said.

However, David Rogers, MD of real estate group Homenet, believes that SA’s property industry can look forward to a property-friendly budget.

"Property and economic health in general are obviously closely linked, and the expectation is that South Africans will hear good news on the questions of tax deductions, the relaxation of foreign-exchange allowances, investment incentives, infrastructure expenditure and social upliftment programmes," he said.