In 2000, commissions, transfer duties and legal costs added R6bn to SA's R50bn residential property transactions. Based on a survey of transaction costs for the Financial Mail, undertaken by property consultants Knight Frank, the findings show that both transfer duty at 8% over R310 000 and estate agents commissions at 7,5%, are higher in South Africa than elsewhere. Legal costs at around 1% are in line with those of the rest of the world.
Consultant Erwin Rode says that these costs reduce the amount and pace of property investment, while economist Francois Viruly feels that they make us uncompetitive. Lower costs would mean more transactions and higher liquidity in the market.
Banking Council of South Africa website
The issue is not only the high commissions earned by agents but also the limited value, in relation to the size of the commission, they add to the process. Furthermore it is likely that the legal costs of 1% do not reflect the reality of the high business acqusition costs of conveyancing attorneys. A large proportion of these business acqusition costs flow to the agents further increasing the effective commmision of agents.
1. What I find even more disturbing is the fact that the purchaser has to pay tranfer duty not only on the purchase price but also the agents commission added thereto. The agent surely pays tax on his/her income, being commission, why the double duty?
2.With bond originators coming into the picture, the agent not only gets his/her already outrageous commission but also a percentage from either the originator or bank.It seems as if it just keeps on adding up for the purchaser.