Impact of the 2025 Budget Speech on South Africa’s Property Market
Finance Minister Enoch Godongwana delivered the 2025 National Budget Speech on 12 March 2025, introducing several key fiscal measures that will influence the property sector. While economic challenges persist, the adjustments announced provide both opportunities and concerns for homebuyers, property investors, and landlords.
Increase in Transfer Duty Threshold – A Positive Development
Transfer duty is a tax imposed on the transfer of ownership of immovable property in South Africa. It applies to all buyers acquiring property, whether through a purchase, donation, or inheritance. The tax is calculated based on the property's purchase price or market value, whichever is higher.
A notable highlight from the speech was the increase in the transfer duty threshold. The amount below which no transfer duty is payable has been raised from R1.1 million to R1.21 million, representing a 10% increase. This move is expected to reduce the financial barriers for first-time homebuyers and stimulate the residential property market by making property ownership more accessible.
By lowering the upfront costs associated with property purchases, this adjustment could drive increased transaction volumes, particularly among middle-income buyers who seek affordable entry into the housing market.
Capital Gains Tax on Residential Property Remains Unchanged
Capital Gains Tax (CGT) is a tax on the profit made when selling a property or other assets for more than their purchase price. In South Africa, if you sell a residential property, you may need to pay CGT on the gain, but the first R2 million of profit on a primary home is exempt. CGT is not a separate tax—it is added to your income tax and calculated accordingly.
Another important takeaway is that there will be no changes to Capital Gains Tax (CGT) on the sale of residential properties. This decision ensures stability for property investors and homeowners looking to sell, eliminating concerns over increased tax liabilities. The unchanged CGT rates provide a sense of certainty, encouraging continued investment in residential real estate.
VAT Increase and Its Broader Implications
One of the less favorable aspects of the budget is the increase in the Value-Added Tax (VAT) rate. The VAT rate will rise from 15% to 15.5% on 1 May 2025, followed by a further increase to 16% on 1 April 2026. This adjustment will have a ripple effect across multiple sectors, including real estate.
Property-related services such as conveyancing, property management, and maintenance will see cost increases due to the higher VAT rate. Additionally, VAT-registered commercial landlords will need to adjust rental pricing to accommodate these changes. Utility expenses—including electricity, water, and WiFi—will also rise as they are subject to VAT, placing additional financial strain on tenants and homeowners.
Conclusion
The 2025 Budget Speech introduced measures that will shape the property market in both positive and challenging ways. The increase in the transfer duty threshold is a welcomed relief for prospective buyers, fostering greater participation in the housing market. However, the VAT increase presents financial challenges that may impact property-related expenses for landlords, tenants, and investors. The stability in Capital Gains Tax, on the other hand, ensures a predictable environment for those looking to sell residential properties.
As the real estate sector adapts to these fiscal changes, industry players must remain strategic and informed to navigate the evolving market conditions effectively.