The 2011 Budget yesterday had great news for property sellers and buyers. Of course, our Minister of Finance announced higher sin taxes and an increase in the fuel levy of 10c per liter. Seems we'll have to dig deeper in our pockets yet again. So what’t the great news then for buyers and sellers?

For the first time since 2006, Government announced lower transfer duty on property up to a maximum of R600,000. This means in the 2011-12 fiscal year, no transfer duty will be payable on a property priced at 600,000 rand or less.

The revised transfer duty rate structure will apply to properties sold in terms of purchase agreements concluded on or after February 23. This will also apply to legal persons, such as closed corporations, companies and trusts.

It is also proposed that the transfer duty exemption and sliding scale rate also apply to non-natural persons (i.e. close corporations, companies and trusts). The transfer duty rate for these persons was 8% of the value of the property to date. A significant effect of these amendments is that it would no longer be more expensive from a transfer duty perspective to purchase property in a company or a trust as opposed to in a natural person’s name.

The transfer duty payable on the purchase of property on or after 23 February 2011 would be calculated in terms of the following table:

Value of property                                                                                                       Transfer duty rate
On the value of the property that does not exceed R600 000:                                      0%
On the value of property that exceeds R600 000, but not R1 000 000:                        3%
On the value of property that exceeds R1 000 000,
but not R1 500 000:                                                                                                    R12 000 plus 5% on the value exceeding R1 000 000
On the value of property that exceeds R1 500 000:                                              R37 000 plus 8% on the value that exceeds R1 500 000

The maximum value of a property exempted from transfer duty was R100,000 in 2002-03; R140,000 in 2003-04; R150,000 in 2004-05; R190,000 in 2005-06; and R500,000 in the period 2006-07 to 2010-11.

This lowering of transfer duty and banks’ mortgage lending criteria for low-income and first-time home buyers should support the lower end of the market. In view of no further interest rate cuts expected in 2011, lower transfer duty would be a positive factor contributing to the performance of the property market in 2011.

It was also announced in the Budget that investigations are underway on a tax incentive for property developers to increase the supply of affordable housing of below R300,000.