TRANSFER DUTY: Property tax boom

The commodities price surge is not the only factor to have boosted tax revenues during the past year. The housing rebound has also delivered an unexpected windfall for the SA Revenue Service.

Transfer duty on property sales raised a record R9.5bn in the 2021/2022 tax year as thousands of South Africans bought houses, taking advantage of interest rates that are at their lowest levels in nearly 50 years.

Earnings from real estate transactions exceeded the previous year’s by 25% and comfortably breached the old record of R8.25bn, set in 2016/2017. That was the last time SA experienced a mini-boom in housing activity (see graph).

It remains to be seen whether the National Treasury’s transfer duty collection estimate of R9.8bn for 2022/2023 will be met, given that the industry expects a slowdown in sales this year due to higher interest rates.

Since November, the prime lending rate has risen from 7% to 7.5% and further increases are expected this year.

Industry players say they are disappointed that no transfer duty relief was offered in this week’s budget. They say it could have provided respite for buyers — especially first-timers — from looming rate increases. The last time the Treasury announced transfer duty changes was two years ago when the exemption threshold was lifted from R900,000 to R1m. At the time, the knock-on effect was a marginal reduction across all brackets in transfer duty payable.

Samuel Seeff, chair of Seeff Property Group, says failure to raise the R1m transfer duty threshold is a "missed opportunity" at a time when lower-income families could have been incentivised to invest in homeownership. "First-time buyers now have to contend with higher mortgage rates as well as bracket creep on transfer duties, since the R1m exemption threshold has not kept tread with the rise in lower-end house prices," he says.

Herschel Jawitz, CEO of Jawitz Properties, says the middle and upper end of the housing market could have been supported by raising the capital gains tax threshold. Levied on the sale of primary residences, this has remained unchanged at R2m since 2017.