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The property developer and the VAT straitjacket
Realestateweb - South Africa
Tax expert tackles tricky VAT issue for buyer looking to save loads of money.

A Realestateweb Community Member asked:
"I am looking at buying a piece of land in a normal residential area that is owned by a property developer. The land is a single erf that is the same size as the other erfs in the suburb - so doing a development thereon is almost impossible or very unlikely. Furthermore there is a moratorium on all "sectional titling" in that area. He bought the property on auction from a bank and paid VAT on it then registered it in a company. However, the land was never developed and he is now selling it with VAT to be added instead of transfer duty. The difference is about 7% which is substantial.

"My question is that if he never developed the land and effectively never intended to, is VAT then not applicable?"

Geraldine Connell, director of Tax at Deloitte & Touche, answers:
Realestateweb

Property market battling
Fin24.co.za - South Africa
Johannesburg - After years of an unprecedented boom, growth in South Africa's property industry is slowing sharply, with consumers battered by higher interest and soaring inflation.

Interest rates have risen by 450 basis points since June 2006 and analysts are betting on another rate rise in June, adding further pressure onto struggling consumers.
The commercial bank's prime lending rate stands 15%.

The central bank warned last week of a sharp rise in non-performing loans, while highly-indebted poor households are battling to cope with rocketing food and fuel prices.
Fin24.co.za

Property Tip of the Day 79 - Hidden costs
RodneyHayter.com - South Africa
Buyers are often unaware of the "hidden" costs incurred in buying a home.

"You need to list these costs and draw up a budget correctly before signing an offer to purchase and being burdened with costs you may be unable to afford," advises Diana McIlrath of Shepstone & Wylie Attorneys property department.

"These include items such as transfer and bond costs as well as removal costs, monthly rates and taxes, bond repayments, insurance and utility bills once the house is registered in your name," she adds.

Transfer costs are legal costs payable by the purchaser of a home and are related to the purchase price of such property.

"It is important to differentiate between transfer or conveyancing fees and transfer duty," says McIlrath.
RodneyHayter.com

Legalities worrying
Tygerburger - South Africa
There is concern that the increasing legalities of buying property are making it even more difficult for first time home buyers to enter the market.

Lauren Maltby, partner at Shepstone & Wylie Attorneys, said it is not solely the legalities of buying that are making it difficult, but a combination of the legalities, the increased property prices and higher interest rates.

"The transfer process has in essence remained the same from a conveyancing perspective, but there are additional requirements of the purchaser in terms of the National Credit Act when obtaining a mortgage loan," she says.
Tygerburger