SA Budget 2025 property market explained. Here is what homebuyers need to know.
The 2025 budget has sparked mixed reactions, but for South Africans looking to buy a home, but there is a silver lining. Hidden among the tax hikes and financial adjustments, the National Treasury has proposed a 10% adjustment to transfer duty thresholds, a move that could benefit homebuyers, especially first-time buyers.
According to Andrew Golding, chief executive of the Pam Golding Property Group, this proposal is great news for first-time buyers, considering the average home price stands at R1.24 million. If approved, this change would provide some much-needed relief amid an otherwise challenging financial landscape for property owners.
VAT hike set to push property costs higher
While first-time buyers might escape transfer duties, they won’t avoid the broader tax increases, particularly the VAT hike. The Treasury plans to increase VAT by 0.5 percentage points in 2025 to 15.5%, followed by another 0.5 percentage point hike in 2026, bringing the total VAT rate to 16%.
This increase will drive up costs across the economy, affecting property transactions and services. Despite an expanded zero-rated basket and a continued fuel levy freeze, consumers will feel the pressure. Golding pointed out that VAT-inclusive services tied to property purchases will become more expensive, leaving buyers to absorb higher costs.
Purchasers of newly built homes will also be impacted, as VAT is already factored into the price of new developments when they hit the market.
Higher VAT could fuel inflation and interest rate hikes
The budget’s wider implications remain uncertain, but a VAT increase could fuel inflation and lead to higher interest rates. The Bureau for Economic Research (BER) previously warned that a 2 percentage point VAT hike could push inflation higher, prompting the South African Reserve Bank (SARB) to react.
According to the BER, such a hike would increase headline inflation (CPI) by about 1 percentage point. Using the Taylor Rule, this would suggest an interest rate closer to 8.3% instead of the current 7.5%. While the 2 percentage point increase is off the table, even the planned 1 percentage point hike over two years could put pressure on the SARB to raise rates.
Interest rates and property market struggles
Higher interest rates have a direct impact on the property market, warns Samuel Seeff, chairman of the Seeff Property Group. As rates rise, house price growth slows, making property less affordable and reducing market demand.
Between 2020 and 2022, house prices surged as the Reserve Bank slashed interest rates during the COVID-19 pandemic. However, by mid-2024, price growth had plummeted to just 0.5% due to the interest rate hikes between 2022 and 2024. While the market is now showing signs of recovery, progress remains sluggish.
Following three 25 basis point interest rate cuts between late 2024 and early 2025, data from FNB shows house prices have only risen by 1.1%.
“Clearly, more rate cuts are needed,” Seeff emphasized.
With transfer duty relief on the horizon but rising VAT and potential interest rate hikes looming, the property market faces a delicate balancing act. Will tax adjustments help revive the sector, or will inflation and borrowing costs keep homeownership out of reach for many? South Africans will need to brace for the evolving financial landscape.
Stay tuned with The South African as SA Budget 2025 property market is explained.
Let us know by leaving a comment below or send a WhatsApp to 060 011 021 1.
Subscribe to The South African website’s newsletters and follow us on WhatsApp, Facebook, X, and Bluesky for the latest news.
