The fact that there is no transfer duty payable on newly-built homes bought directly from a developer or a builder is no longer the “big plus” that it used to be for first-time buyers who are short of cash. In fact, it could actually prove to be something of a disadvantage because while the buyers of pre-owned homes costing less than R900 000 are paying no transfer duty at all, the buyers of new homes in the same price range still have to pay VAT at 14 percent.
In simple terms, this means that the buyer of a new home will be getting less home for his money than if he were to buy a pre-owned home at the same price. And this situation is likely to be exacerbated by high building costs, which already make new homes much more expensive, in rands-per-square-metre terms, than older ones.
The latest Absa Housing Review puts the average differential between the cost of a new home and the cost of a comparable pre-owned home at 34.5 percent.
But there are, of course, many advantages to buying a brand new home – not the least of which is that it will come with statutory guarantees as regards the structure and the roof, and that the buyer will probably have to spend very little on maintenance and repair in the critical first few years of ownership. There are also not enough pre-owned homes to satisfy the rising demand for housing in SA, especially with the introduction of the new housing subsidy to help the thousands of “gap market” buyers such as teachers, nurses, soldiers and policemen who were previously shut out of the market.
Consequently, some in the industry feel that there is a real need now for government to seriously consider some form of tax relief for first-time buyers. This might be as simple as making new homes up to R900 000 exempt from VAT when bought by a first-time purchaser, or it could take the form of an individual tax rebate on home loan repayments for buyers in this sector. But whatever form it takes, it is going to be a necessary part of levelling the playing field so that all South Africans can participate equally in the wealth-creating benefits of the property market.