Why transfer duties should be reduced

Posted Tue, 15 Feb 2005

Since 2002, Finance Minister Trevor Manual has lightened the tax load on property stamp duty and transfer duty but unless he takes these steps further, he is effectively denying people access to the property ladder.

Saul Geffen, managing director of MortgageSA says: “We expect the trend of lighter property taxes to continue in the new budget and be given further momentum via the financial services charter.

“But the biggest outcome we would like to see in this year’s 2005 budget is the unlocking of access to finance for the low- to middle-income market and reduced property purchase taxes. To do this we would look to government to again raise the minimum levels at which transfer duties apply and reduce the transfer duty rate.”

Geffen says the increase in property prices over the past 12 months has pushed the purchase of property out of reach for many — especially those in the low- to middle-income sectors where the need is greatest.

“The rapid escalation in house prices means the level below which buyers are exempted from transfer duty should rise from R150 000 to R200 000. This is around a 30 percent increase which is in line with the property market appreciation in 2004.” Geffen is also calling for a decrease on the rate of taxation on transfer.

“As transfer duty — currently at 8 percent — is levied on a percentage of the price of the property, buyers are suffering from higher transfer duties making affordability more difficult because prices have increased dramatically. As a result of the significant increases in property prices, government can reduce the transfer duty rates and still collect the same amount of taxes.

“These ‘hidden’ costs are effectively pushing buyers out of the market. Reducing this rate of taxation should offer some relief to those first-time and lower- to middle-income homebuyers.”

Article from : http://mymoney.iafrica.com/homefront/414158.htm