Last month, the National Treasury unveiled their 2024 Budget, setting out the government’s economic forecasts and tax and spending plans for the year. But despite big moves in other areas, there was little news for the real estate sector.
Property taxes untouched
Ahead of the budget, real estate industry figures called on the government to leave personal and property taxes untouched as a “bare minimum”, and ideally to bring in new tax reliefs.
As it happened, there were no new tax reliefs, but also no hikes to Transfer Duty or Capital Gains Tax. By leaving tax rates alone, the government will not be putting further pressure on the flagging sales market.
However, leaving the threshold for Transfer Duty at R1.1 million despite house price growth means that more sales will be taxed. According to ooba Home Loans, the average price paid by first-time buyers in January 2024 was R1.18 million, up 4.1% year on year, putting them into taxable territory.
Fiscal drag and inflation could hurt tenant affordability
Frozen tax thresholds won’t only affect home buyers. Personal tax thresholds have also been left unchanged, while data from the latest PayProp Rental Index shows that the average income of rental applicants rose 7.5% year-on-year – pushing more tenants into higher brackets. Inflation also ticked up to 5.3% in January (from 5.1% in December), pushing up the cost of living.
The PayProp Rental Index also shows that arrears have been on a welcome downward trend, suggesting that tenants can still afford and prioritise their rent – but if income growth stalls or inflation keeps going up, that could change. The National Treasury expects economic growth of just 1.3% in 2024, which may not leave much room for wage increases.
Solar incentives scrapped
The housing sector wasn’t left completely untouched. In one blow to homeowners, tax incentives for rooftop solar panel installation were allowed to run out at the end of February. Solar panels and other backup electricity solutions have become increasingly popular because of environmental concerns and load shedding, but landlords who install them will no longer be able to claim 25% of the cost back as a tax credit.
