Plea for first-time subsidy

REAL estate group Seeff Properties has called for more research into the possibility of a subsidy for first-time home buyers to help them enter the property market.

Ian Slot, MD of Seeff Atlantic Seaboard, CBD and City Bowl in Western Cape, says the group is suggesting the introduction of a subsidy for first-time buyers.

If home ownership is a cornerstone of a stable democracy, then difficulty in getting on to the first rung of the home ownership ladder is cause for concern, he says.

SA is generating a lot of tax through property transactions. Some of it should be used to help first-time home buyers. With prospective first-time buyers “locked in a rental matrix” they cannot “get on to that first rung”.

“In the current property situation, interest rates are increasing, and property prices are increasing, and that first rung is getting further and further away from them,” says Slot.

Such a subsidy would have to come from the state. “I don’t know how the numbers would stack up, I don’t know how many people would fall into this category, and I don’t know how large the subsidy would be. That is something for economists and researchers to work out.”

Slot wants a subsidy of about 10% of the purchase price of a first home. If the state guaranteed a further 20% of the loan for the buyer, this would mean “banks would be certain of at least 30%”. In a repossession, they would have to sell it only for 70% of the initial selling price to recover their exposure. This would give banks the comfort to extend loans to first-time buyers and encourage developers to bring more property stock aimed at this buying segment to market.

Making the interest portion of mortgage payments tax deductible would help.

Article by: Nick Wilson - www.businessday.co.za