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Property 24/10 - 351

26 April 2017

SA’s downgrade increases risk of tenants defaulting on rent
There are several major changes that can be expected to play out in the property market in the wake of South Africa’s credit ratings downgrade, and owners and investors need to put plans in place now to manage these shifts and protect the value of their assets according to Andrew Shaefer, MD of national property management company Trafalgar, who says that sectional title owners, for example, will need to keep a close eye on what is going on in their complexes with regards to the payment of levies.

“The downgrade means that our currency will be worth less, that inflation is likely to rise and that interest rates and taxes are also likely to increase. This will put consumers under severe financial pressure and many of those living in sectional title schemes will struggle to pay their bonds or rentals - and could easily get into arrears on their levies,” says Shaefer.
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Is it a good idea to hold property in a trust post-Budget 2017?
With the changes introduced in this year’s Budget affecting the wealthy in particular, one might wonder if holding a property in a trust still makes sense.

Normally, Fourie says transferring property from a trust will attract transfer duty, conveyancing fees and CGT. “Unfortunately, it is not as simple as transferring the property out and closing the trust as there are permutations to consider,” says Willie Fourie, Head of Fiduciary Services at PSG Wealth.

As a quick reminder, Fourie says the key changes are:

- Higher marginal tax rate on income above R1.5 million (45%).

- Effective Capital Gains Tax (CGT) rate for individuals and special trusts increased to 18%.

- Effective CGT rate for other trusts increased to 36%.
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Do you know what your property is worth? You should
It’s a great irony in the property business that having bought a dream home and investing more in it than in any other asset we own - more than any asset we’re ever likely to own, we don’t really know our property’s value.

Denis Quayle, Principal at Harcourts Maynard Burgoyne, says often, we don’t realise this.

“After all, most of us are working off a bond, so we can give a rough-and-ready estimate that pegs our property at about what our properties are bonded for. Or we might have a sense of what the municipality has valued the property for. Or we might notice out of the corner of an eye what our neighbours are selling for,” says Quayle.
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Commonly overlooked costs when buying or selling property
Whether you are buying or selling a home, the transaction will come with certain cost implications.

When planning their finances around the purchase or sale of a property, Debbie Justus-Ferns, divisional manager of Renprop Residential Sales, says buyers and sellers often overlook some items and forget to include them in their budget.

“Expenses such as agent commission, transfer fees, compliance certificates, rates clearance costs and the actual cost of moving are some of the big ticket and obvious expenses that buyers and sellers make sure they outline in their budgets,” says Justus-Ferns.

“But there are other costs, some more obvious than others, that are often overlooked when working out expenses.”
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