24 February 2016 by Cliffe Dekker Hofmeyr Special Edition Tax and Exchange Control Alert

An increase in transfer duty – will it dampen the property market?

Last year’s increase in the threshold for transfer duty to R750 000 was positive, but unfortunately no further relief is provided this year for properties on the lower end of the market.

Property owners at the top end of the market will, however, be worse off. The Minister announced that the transfer duty rate on properties above R10 million will increase from 11% to 13%. Consequently a new bracket in the transfer duty table will be formed. Transfer duty in this new bracket will, with effect from 1 March 2016, be R937 500 + 13% of the value exceeding R10 million.

It can be expected that those in the lower income groups will remain encouraged to invest in their own homes and thus save, but the same sort of encouragement may not be felt by investors, especially when viewed against a backdrop of gradually increasing interest rates and a sluggish economy.

With the ever-rising electricity, food, fuel costs and other consequences of inflation, it remains to be seen how the increase will affect market confidence and the Minister’s plan to achieve sustainable growth.

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