Despite concerns over an upcoming VAT increase impacting transaction costs in the property sector, RE/MAX of Southern Africa reports strong property market growth driven by increased sales activity and favourable interest rates.

RE/MAX of Southern Africa has reported impressive growth figures at the end of March, showing resilience in a challenging market. Registered sales for the brand are 6.9% ahead of the same period last year, while reported sales have surged by 10.5% compared to the previous year.

Adrian Goslett, the regional director and CEO of RE/MAX of Southern Africa YTD, said their network’s commission income is also up 3.9% over the same period in 2021, which was their prior highest earning year YTD.

“That means, as of March, we're in the best commission earnings position we've ever been. This is largely because rental commissions have contributed more than in the past. Rental markets across the country have remained active ever since the post-pandemic interest rate hiking cycle started, which made renting more attractive than buying,” said Goslett.

Now that interest rates have come down, Goslett predicts that it is likely that the sector might see activity begin to shift back slightly towards homeownership.

“The fact that our registered and reported sales figures have both seen impressive growth in the last month is an encouraging sign of what’s to come.

"While there was no interest rate cut at the last MPC meeting, it does seem as though interest rates have come down enough to stimulate greater activity within the local housing market,” Goslett noted.

Although the looming VAT increase will most likely slow down this growth, Goslett remains cautiously optimistic about what the year ahead has in store for the real estate market.

“Overall, the risks to growth within the property market seem largely balanced. As things currently stand, an interest rate hike is not forecasted for 2025. This should help with affordability challenges and help sustain activity in the property market,” he said.

While the potential for growth remains strong, Goslett also cautions that the VAT increase will impact the cost of buying and selling property, as VAT is charged on agents’ commission fees. He advises real estate professionals to encourage buyers to act sooner rather than later to avoid the higher costs.

“Those who purchase now will also benefit from the years of slowed house price appreciation that resulted from high interest rates. Now that interest rates are lower, house prices are likely to show stronger growth, so the sooner you can move out of the rental market and into homeownership, the better,” Goslett said.

Mamello Matikinca-Ngwenya, FNB chief economist, said last month that the prospect of significantly higher taxes - either via VAT hikes or further bracket creep on the personal income tax front - likely alarmed many consumers.

“Even though the March Budget softened the VAT hike, it still places a significant tax burden on consumers,” Matikinca-Ngwenya said.

Reacting to the budget tabled by Finance Minister Enoch Godongwana last month, Eric Enslin, the CEO of Private Banking and Advisory at FNB, said the transfer duty bracket has been increased in this year’s budget.

“The property value below which no transfer duty is payable has been increased by 10%, rising from R1.1 million to R1.21 million. This adjustment is designed to alleviate the financial burden on homebuyers, particularly first-time purchasers, by reducing upfront costs associated with property transactions,” Enslin said.

The CEO said the escalation in VAT, however, is anticipated to elevate costs across various sectors, including property-related services such as conveyancing and maintenance, potentially offsetting some benefits gained from the transfer duty relief.

“Additionally, the Capital Gains Tax (CGT) exemption thresholds remain unchanged, maintaining the annual exclusion at R40 000 and the primary residence exclusion at R2 million.

"These fiscal measures collectively aim to balance the promotion of property ownership with the need to enhance government revenue, influencing both current and prospective property investors.”

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