Imminent VAT increase takes effect on property industry

1 March 2018, Thursday

For the first time in 25 years, the Value Added Tax (VAT) has increased from 14% to 15% from the 1 April 2018. With this date having come and gone, the VAT increase has officially come into effect. You may be wondering how this change will affect those of you who have already bought or are still in the process of purchasing within a new estate development.

The limited time to take action and conclude your property sales preceding to 1 April has now expired. You need not worry if you have concluded your sale prior to this date, as, according to the VAT Act, a special provision has been given to you. In other words, you will continue to pay the 14% VAT for your investment; allowing you to pay less and gain a lot more in the long run.

For those with inconclusive off-plan development sale agreements, will now have to pay towards the new 15% VAT; which will inevitably result in higher costs. According to a Property24 article, “Just 1% difference in VAT equates to R10 000 per R1 million spent,” shares Chris Renecle, MD of Renprop.

The VAT increase not only has an impact on buyers and investors, it also sees developers potentially take on fluctuating fuel prices and building materials. Developers might experience slower sales rates, as the cost of property rises beyond homeowner’s budgets.

There is no doubt that the VAT increase is going to affect everyone, which is why it is even more important to have developments positioned competitively in the property market place. Market research will inevitably play a vital role as developers counter the challenges of the VAT costs to produce homes that are exceptional and speak to investors and families alike.

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