Why Is My New Build Losing Money? VAT or Transfer Duty
"No transfer duty!" It's always in the biggest letters on a developer's brochure. Brand new. Nothing to fix. It sounds like a discount. It isn't one.
Okay, so here's how it actually works. You pay either VAT or transfer duty on a property purchase, never both. When the seller is a VAT-registered developer selling in the course of business, the price includes VAT and no transfer duty is payable. That doesn't make a new build cheaper. The VAT is already inside the price you pay.
I learnt the price lesson the hard way. My first property, in Amsterdam in 2003, I paid too close to the asking price at the wrong point in the cycle. It cost me over €14,000. A launch price is the asking price with a marketing budget behind it.
What is transfer duty in South Africa?
Transfer duty is a tax the buyer pays to SARS when property changes hands. It's calculated on a sliding scale based on the value of the property, and it must be paid before the property can be registered in the buyer's name.
Two things most people don't know.
The first slice is free. On properties up to R1,210,000, no transfer duty is payable (SARS table effective 1 April 2026). Above that, the rate climbs in steps.
It's the same for everybody. Individuals and companies pay transfer duty on the same scale. A company doesn't pay more. That one comes up at every braai, and it's kak.
When do you pay VAT instead of transfer duty?
When the seller is a VAT vendor selling the property as part of its business. A developer selling new units is the classic case.
In that situation the sale is subject to VAT, and it's exempt from transfer duty. One or the other. Never both.
On a resale from a private owner, it's the other way round. No VAT. Transfer duty applies, if the price is above the threshold.
Get the structure right first. The Directors Fortress is the step-by-step for buying property in a company name. R99 once off. Start here
Ja, but is a new build cheaper?
Not because of that.
The VAT is already inside the price. When a developer advertises a unit at a price, VAT is part of that number. You're not saving a tax. You're paying a different one, and it's been folded into the sticker.
Now add the second thing. A launch price is set by the developer. It's often higher than what the same unit resells for a few years later, once it's one of many in the building and no longer the newest thing in the suburb.
So the real comparison isn't new build against transfer duty. It's this: what am I paying, all in, against what similar units in this area sell for? Pull a Lightstone report and look at actual sales, not the brochure.
What other costs come with a property transfer?
Transfer duty or VAT is one line. These are the others, and they apply whether the unit is new or old.
Conveyancing fees for the transfer attorney. On many new developments the developer appoints the attorney and may cover this. Check.
Bond registration costs if you're borrowing. A separate attorney, a separate fee.
Deeds Office fees.
Rates and levies in advance, paid to get clearance figures.
Occupational rent if you move in or take the keys before registration.
Ask for a full cost schedule in writing before you sign. A brochure is marketing. A cost schedule is information.
When is a new build worth it?
New builds can be very good rentals. Low maintenance in the early years. Easy to let. Modern finishes tenants want.
I'd look harder at one when:
The price holds up against recent resales nearby, not only against other launches
The levy is realistic and the developer isn't subsidising it to make the numbers look good
The rent you're assuming is what similar units are achieving today
You can carry it through the gap between paying a deposit and the first tenant moving in
For the deal check itself, use the three numbers in how to analyse a rental property.
What I'd watch for
Delays happen. Buying off-plan means waiting, and completion dates move.
Levies and rates on a new scheme are estimates until the scheme has run for a year or two. And a brand-new body corporate is still finding its feet. In my experience, body corporate accounting can be a mess even in established schemes.
You can't inspect what isn't built. You're buying from plans and a show unit.
Resale takes time when the developer is still selling new stock in the same building.
VAT and transfer duty treatment depends on the seller's status. Have the conveyancer confirm which applies before you sign.
Where the company fits
Transfer duty is the same scale whether you or a company buys. So is VAT. Neither is a reason to pick one name over the other.
The reason is what happens after. A new unit bought in a company sits behind the company wall, and the bank weighs what it earns when you go back for the next one. The full walk through an offer and its figures is a module in The Vault. Start with the container first.
FAQ
Do I pay transfer duty on a new build in South Africa?
Usually not. If the developer is a VAT vendor, the sale is subject to VAT and exempt from transfer duty.
What is the transfer duty threshold in South Africa?
No transfer duty is payable on properties up to R1,210,000, according to the SARS table effective 1 April 2026. Check the current table before you buy.
Does a company pay more transfer duty than an individual?
No. Companies and individuals pay on the same scale.
Who pays transfer duty, the buyer or the seller?
The buyer. It's paid to SARS through the conveyancer before registration.
Is VAT included in the price of a new development?
Normally yes. Confirm in the sale agreement that the price is VAT inclusive.
Related reading
Get the foundation right
The Directors Fortress gives you the investor-friendly offer to purchase, the blueprint for registering the entity, and a walkthrough of the structure I use. R99 once off, yours to keep.
Education only. This article is general information, not tax, legal or financial advice. Speak to a registered tax practitioner, attorney or financial adviser about your own situation.
Sources
SARS, Transfer Duty: sars.gov.za · SARS, Value-Added Tax: sars.gov.za
About the author
Michael Bowen co-founded ZAHomes. He bought his first property in 2003 on the outskirts of Amsterdam, with a 100% mortgage, at the wrong point in the cycle, and lost over €14,000 on it while sanding the floors himself in a heatwave. Twenty-odd years, 40-odd countries and a lot of property school fees later, he lives in Cape Town and teaches South Africans to buy and hold property inside a company. His view hasn't changed: an investor's greatest assets are the lessons from their failed deals.
