R110,000 gift for people who buy a home in South Africa

While the March National Budget created many pain points for South African households, it also gave homebuyers the ‘gift’ of increasing the transfer duty exemption threshold.

In South Africa, elevated household debt and uncertain interest rate relief paint a challenging picture for South African households in 2025.

These stresses were compounded following the tabling of the revised budget for 2025, which revealed plans to increase value-added tax (VAT) and no adjustments to personal income tax brackets, among other things.

These measures further strain household income, with the freeze of tax brackets and VAT increase being the immediate cost pressures.

The minister initially sought to hike VAT by two percentage points to 17% in 2025, but partners within the Government of National Unity rejected this plan.

After careful consideration, the government has still opted to increase VAT, but now only by 0.5 percentage points in 2025, and a further 0.5 percentage points in 2026.

The VAT hike is expected to raise R13.5 billion in 2025, much less than the R60 billion it sought to raise through its initial proposal of a two-percentage-point increase.

The decision not to adjust tax brackets is expected to raise R28 billion in additional revenue in 2025/26 and R14.5 billion in 2026/27.

However, the freeze on tax brackets means taxpayers fall prey to bracket creep, which could lead to individuals effectively paying higher personal income taxes as they move into higher brackets.

Despite these bits of bad news for South Africans, the budget revealed some good news for homebuyers, especially those looking to buy a home for the first time.

This follows the upward adjustment of the transfer duty tables by 10% or R110,000 in this year’s Budget 2025, which increased the exemption threshold for transfer duty from R1.1 million to R1.21 million.

Transfer Duty is a tax levied on the value of any property acquired by any person through a transaction or in any other way.

Good news for first-time buyers

Samuel Seeff, chairman of the Seeff Group, said this, in addition to interest rate savings following the recent rate cuts, will provide further savings for first-time buyers.

“It has improved affordability, especially given that the average price for first-time homebuyers is around R1.264 million, according to mortgage originators ooba,” said Seeff.

Lightstone data shows that first-time buyers tend to purchase in the R700,000 to R1.5 million price range.

Almost half of all home loan applications in the last quarter of last year were from first-time homebuyers, with buying levels growing by about 9% during the latter half of last year compared to the first half.

Affordability issues for first-time buyers are evident in the deeds office data, which shows that these buyers are now older than they were a decade ago.

However, Seeff noted that most of the bigger metros have experienced good levels of younger buyers under 35, who make up around one-third in many areas.

“The highest levels of younger buyers are in the Greater Joburg area, with the East Rand (50%) leading, followed by Johannesburg (29%), Pretoria/Tshwane (29%), and Soweto (27%),” said Seeff.

“The other metros also include good levels, such as Bloemfontein (28%) and Gqeberha (28%), with Durban (26%) and Cape Town (26%) at slightly lower levels.”

Seeff further noted that the continued favourable mortgage lending is another upside for first-time buyers.

“Ooba, for example, recently noted that first-time buyers accounted for 46% of home loan applications,” he said.

“These buyers are often still able to secure loans of up to 100% of the property’s value, with some banks still offering costs on top of that.”

While first-time buyers’ most dominant price range is between R700,000 and R1.5 million, Lightstone data shows that about 80% of purchases are below R1.2 million, with only about 7.5% over R1.5 million.

Johannesburg and Durban metro areas tend to be more affordable for first-time buyers than the Cape Town metro area.

The relatively flat price growth over the last two years means that first-time buyers can still find good value in the market.

“And with the reduced interest rate and no transfer duty below R1.2 million, the market is more favourable for first-time buyers compared to a year ago,” added Seeff.