Monday, December 7, 2009


While many are viewing the property investment market critically, due to obvious losses in many sectors, the shrewd investor knows that opportunities exist in every single market condition.

Similarly, stock market investors will shift their stock holdings from perhaps retail into gold or platinum as the market conditions change. To claim that there is no money to be made on the stock exchange just because a certain stock did not perform is silly and short sighted.

Of importance to note, is that property prices are fast approaching their levels of 12 to 18 months ago. In other words, the investor in property has lost nothing in terms of capital. Those that lost through forced sales (and I do not want to appear unfeeling here), did so because they bought in an overpriced market at a level above their safe risk zone. In other words, only bad investors have lost money on property.

The question therefore is simply - what makes a good investment currently. Commercial properties continue to be under stress and the statistics from many shopping centers will bear this out. Pure residential investment while currently viable in a growing market can be viable but one needs to still be careful of secondary fallout form the global recession.

My thoughts? Go for student accommodation. The opening up of South African society has seen massive increases in demand for university and college education. Subsidies are widely available. Many more people from the previously disadvantaged groups are entering the middle and upper income groups. Rural areas are developing and student aspirations with it. This burgeoning group of students will need a place to stay.

A stroll around any inner city area or suburbia close to places of further learning quickly reveals that students make up a large group of the population - by tenancy. Simply because the institutions themselves cannot cope or are overpriced.

Viewed in these terms, a two bedroomed flat, instead of generating a single rental income, can now be viewed as shared accommodation for four students - with corresponding increases in total rental income. And of course students are less demanding in terms of demanding the kitchen be revamped and other such demands. Providing the accommodation is neat you will have happy tenants - and parents or subsidies footing the bill.

Many of these students are being abused in terms of quality of accomodation and if you set yourself apart as a landlord of choice, you will have a never ending stream of income.


Government through its housing subsidy programme assists people with very low salaries to buy houses. Many people however are not sure how to access this assistance, so I thought that this original article by Denise Mhlanga would be helpful.

I would like to help my employee who lives in a shack buy a simple house in Cape Town. Could you please tell me more about government's housing grants and where one can go to for subsidy application?


The Housing Subsidy Programme provides financial assistance to poor people, enabling them to buy decent houses. According to Louella Lekgetha, deputy director of Subsidy Administration at the Gauteng Provincial Government, the national housing programme was introduced post 1994 called the Housing Subsidy Scheme.
She said the grants were then R9 500 with an escalation of 10% serving as cushion against the ever rising building costs.

"The establishment of these grants were aimed at providing land and houses to the poorest households in the country," said Lekgetha.

Lekgetha said first-time buyers in the low-income earning group can access housing subsidies through their local housing department. The subsidy could be used to buy an existing house, including the property on which the house stands.

It can only be given to an individual once and is not given to the applicant as cash but is paid directly to the financial institution or conveyancing attorney.
The housing subsidy is not a loan. An individual does not have to pay it back.
People earning salaries of up to R3 500 are granted housing subsidies of R44 000.
She said people from this category do not qualify for mortgage finance and lending institutions. It is for this reason grants are not paid back.
For individuals earning between R3 500 and R7 000, grant subsidies are reduced.
If the amount they will be given is not enough for the property they are purchasing, they will then attach the subsidy amount to mortgage finance.
As an example, Lekgetha said a salary of R3 501 to R3 600 has a subsidy grant of R28 090 while that of R3 601 to R3 700 has a subsidy grant of R27 931.

Requirements for subsidy grants
  • An applicant has to be a South African citizen at least 21 years of age.
  • They should not have benefited from government assistance in buying any property and should not own a fixed property at the time of application.
  • Single people with financial dependents are eligible to apply for the subsidy grant as married or co-habiting couples.
To apply for the subsidy grant, applicants should go to their local housing departments with their personal documents which include: green bar-coded identity document, marriage certificate (where applicable), dependents' identity documents or birth certificates, and recent payslip which is not older than six months.
There will be application forms to be filled in, which will assist the department of housing to assess and set terms of the subsidy qualifying criteria - such as how much money the grant will amount to, based on earnings.

Nedbank Corporate Property Finance, through its Affordable Housing Division, assists many people.

Jeff Lawrence, head of Nedbank Retail's Affordable Housing Home Loans Division said Nedbank funds affordable housing developments in most metropolitan areas in South Africa where a tangible need for affordable housing has been demonstrated. Nedbank recently funded new affordable housing developments in the Soshanguve area, where 775 homes will be built.

Lawrence said affordable housing will mostly fall below the R350 000 range.
Information can be obtained at any Nedbank branch, or visit the Nedbank website and selecting the home loans option at or telephone the call centre on 0860 555 111.
Alternatively, employees can contact me directly and I will direct them to the necessary assistance. My website is at


The Taxation Laws Amendment Act 2009 introduces two concessions relating to residential properties in South Africa.  As we explain below, however, one of them has a sting in the tail.


As is by now well known, the first R1.5m of the gain on disposal of the primary residence of a taxpayer is excluded from CGT.  With effect from 1 March 2009 a further exclusion has been added, which will simplify things for many home owners.  If the proceeds of the disposal of a primary residence do not exceed R2m, then any gain or loss must be disregarded.

This should encompass many thousands of primary residences.  However, the provision only applies if, throughout the period from 1 October 2001, (when CGT was introduced), or the date of acquisition of the residence, whichever occurred second, the owner or spouse, or the beneficiary in the case of a special trust, used the property as a primary residence and did not use it for the purposes of carrying on a trade.

At first glance, this seems to be a concession, but it has within it a potential disadvantage.  If the residence is sold for less than R2m at a loss, which is quite possible in the current economic climate, the taxpayer loses the tax benefit of the capital loss, because the application of the provision is not optional.


It seems that many taxpayers failed to take advantage of the opportunity to transfer their primary residences out of companies and trusts during the two year window period after 1 October 2001.  (See previous blog article regarding pitfalls) This left many such entities exposed to the CGT, the secondary tax on companies (and later its successor the dividends tax) and transfer duty implications of disposal in the future.  In addition, of course, residences held in a company or trust do not enjoy the primary residence exclusion.

Another window period has been established, from 11 February 2009 to 31 December 2011.  Where an interest in a domestic residence is transferred to a natural person or spouse in terms of this provision, and the qualifying requirements apply, the person (and spouse where applicable) and the entity are deemed to be one and the same person for CGT purposes.  In addition, the transfer, to the extent that it comprises a dividend, is not subject to STC, and transfer duty is not payable.

The qualifying requirements are that:

a) in the case of a company, the person or spouse held all the share capital or members' interest from 11 February 2009 until the date of registration of transfer.  In the case of a trust, the person or spouse disposed of the residence to the trust by way of donation, settlement or other disposition or financed all the expenditure incurred by the trust to acquire and improve the residence; and

b) the person alone or together with his or her spouse personally and ordinarily resided in the residence and used it mainly for domestic purposes as their ordinary residence from 11 February 2009 to the date of registration of transfer.

Important to note, is that if the property exceeds 2 ha in size, any portion in excess of that limit will not enjoy the benefit of the concession.

The concession also does not apply to the fairly common situation where the residence is housed in a company, all the shares of which are held by a family trust.

Interestingly, this provision refers to "domestic residence", of which there is no definition in the Act, and not "primary residence", of which there is.  It raises the question whether its use is deliberate or inadvertent.  Does it mean that it applies, for example, to a holiday home, which can quite easily meet the requirement of "domestic purposes" and "ordinary residence" without qualifying as the "primary residence"?  Or is it a slip of the pen? There have been no legal precedents in this matter and one suspects the latter to be the case, in which case we can expect "domestic" to be replaced by "primary" in the near future.

Finally, it is noteworthy that a condition for the R2m provision to apply is that the residence must have been used exclusively as the primary residence, whereas a residence housed in an entity may have been used partly for trade purposes.