Advice and Opinion

2017’s Budget Speech signals an opportunity for first-time home buyers

Shaun Rademeyer, CEO of Betterbond.
Shaun Rademeyer, CEO of Betterbond.

Shaun Rademeyer, CEO of BetterLife Home Loans, says home buyers and sellers alike should be delighted with the Finance Minister’s announcement today that the Transfer Duty threshold on home purchases is to be raised from R750 000 to R900 000.

“This will immediately reduce the transaction costs for buyers at this level by about R15 000 to R20 000, and will especially benefit first-time entrants to the market who do not have equity in an existing home that they can use as a deposit, but must instead save up 10% to 15% of the purchase price, plus the transaction costs, in order to qualify for home loans”.

“We expect to see a significant increase in home loan applications from first-time buyers as a result of this change, which is clearly part of a new government focus on trying to promote home ownership as the basis of personal wealth creation and one of the cornerstones of a more inclusive economy.” 

Rademeyer also says that consumers across the board are breathing a sigh of relief at the fact that there was no increase in VAT announced in the Budget, and no general increase in income tax.

“Household budgets are of course still under pressure from higher food, electricity and water costs, and they are going to feel the pinch of higher transport costs when the fuel levy and the road accident fund levy are increased in April. But most will at least not have to pay higher taxes this year – and if interest rates stay as they are, this may give people a real opportunity to start reducing their debts and increasing their savings.”

Meanwhile, he notes, the Minister’s decision to focus the overall Budget on promoting growth, boosting confidence and attracting investment in order to ensure enterprise development and job creation is a brave move that will also have a positive effect on the property market in the medium to longer-term.

“People buy property when they have confidence in the country and when they are employed and there will no doubt be more people entering the market if these measures come to fruition.”

“Home seekers obviously also prefer to buy in places where they have access to water, reliable power supplies, clean roads, good public transport and fast internet connections, and the allocations announced in today’s budget to significantly improve municipal management capacities and improve our urban environments are also very welcome.”

“However, we are concerned at the steep increase in the personal tax rate for those in the top income brackets, with the marginal rate for those earning over R1,5m a year being 45% now. This is going to reduce the appetite for large and luxury homes and it thus threatens to put a lid on price increases in the upper reaches of the residential market, which is where government will now be getting most of its transfer duty revenue. Add the 5% increase in the dividend tax, which is mostly paid by more affluent citizens, and we foresee increased challenges in this market segment in the coming year.”