Good news for people buying a home in South Africa

While the 2025 budget has been met with mixed views, the proposals carry some welcome news for South Africans looking to buy a home.

Hidden among the swathe of tax hikes and adjustments to benefits, National Treasury has quietly proposed a 10% adjustment to the thresholds for transfer duties.

This will mean that homes valued under R1.21 million will be exempt from having to pay transfer duties, which is up from R1.1 million before.

According to Andrew Golding, chief executive of the Pam Golding Property group, this is particularly excellent news for first-time homebuyers, where the average home is priced at R1.24 million.

If the budget gets passed later this year, this should provide some relief in what was otherwise a difficult budget for property owners.

While first-time buyers are primed to skip transfer duties, the other budget proposals can’t be avoided, particularly the VAT hike.

Treasury wants to hike VAT by 0.5%pts in 2025 to 15.5%, followed by another 0.5%pt hike in 2026, taking the VAT rate to 16%.

This will impact pricing across all value chains, even with an expanded zero-rated basket and other relief measures, like a continued fuel levy freeze.

South Africans across the board will also be negatively impacted by the lack of inflationary adjustments for personal income tax bracket creep and medical tax credits.

Golding noted that the property sector has a significant number of VAT-inclusive services associated with the purchase of a home, which buyers will now have to fork out for.

Purchasers of new-build units will also be affected, as VAT is incorporated in the purchase price of new developments when brought to market by developers.

The true cost of hiking VAT

The wider implication of the budget is yet to be felt, however, as a VAT hike could lead to higher levels of inflation and, ultimately, higher interest rates.

This is one of the bigger impacts of the VAT hike that has not been highlighted in many budget reviews.

The Bureau for Economic Research (BER) warned after the February budget was shelved that a 2%pt hike in VAT would lead to higher inflation, putting the South African Reserve Bank (SARB) on edge.

The BER said a 2%pt hike would spike headline inflation (CPI) by about 1%pt. Using the Taylor Rule, this would imply the interest rate should be closer to 8.30%, compared to the current level of 7.50%.

While the 2%pt hike is no longer on the table, the BER said that even a 1%pt hike—now envisioned over two years—yields a similar result, and could put the SARB on the path to hiking rates.

Samuel Seeff, chairman of the Seeff Property Group, said that interest rates have a massive impact on the property market.

House price growth over the past few years has tanked in proportion to higher interest rates.

Seeff noted that between 2020 and 2022 house price growth surged as the Reserve Bank cut interest rates in response to the Covid-19 pandemic.

By mid-2024, however, it was down to just 0.5%, following the crises in 2022-2024 that saw interest rates surge higher and stick there for longer.

As property affordability declines, the demand for property in the market goes along with it, Seeff said. While the market now appears to be recovering, data shows that the road is slow.

Following three 25bps interest rate cuts at the end of 2024 and early 2025, data from FNB shows that house prices have only increased by 1.1%.

“Clearly more rate cuts are needed,” Seeff said.

While the property sector says there is “ample” reason for the Reserve Bank to cut interest rates further in 2025—thanks to lower-than-expected inflation—the Treasury’s tax proposals and the VAT hike, in particular, could flip this.