Landsdowne Property Group, one of South Africa's largest residential real estate managers and estate agencies, says an increase in VAT will put more pressure on already struggling consumers, leaving them with less disposable income. This could lead to reduced spending, lower savings and fewer big purchases like buying a home.
On 1 May 2025, South Africa will likely see a 0.5 percentage point increase in the VAT rate to 15.5%. This adjustment, as proposed by Finance Minister Enoch Godongwana in his Budget Speech on
13 March, is part of a broader budget move, which also includes another 0.5 percentage VAT hike planned for 1 April 2026.
Jonathan Kohler, Founder and CEO of Landsdowne commented:
“Many buyers may delay their property purchases, opt for lower-priced homes or look at up-and-coming areas where they get better value for money. Tenants may also need to downsize to more affordable properties, which will affect activity in the residential property market.”
Kohler said VAT is a tax added to the price of goods and services, increasing the cost of daily necessities. Low-income households, which spend a larger portion of their income on essentials, will be hit the hardest. Businesses, including developers of new homes, may also pass on higher costs to consumers, contributing to inflation and rising living expenses.
What buyers and tenants can do
The VAT increase will affect everyone, but careful planning and smart financial decisions can help buyers and tenants navigate the changes. To lessen the impact of a VAT increase, here are practical tips for buyers and tenants:
Buy before prices rise: Those considering buying a home should act before the VAT hike takes effect to avoid paying more.
Consider existing properties: VAT mainly applies to new developments, so purchasing an existing home could help buyers avoid the extra tax.
Secure a good home loan: Consulting a mortgage expert early can help buyers lock in a favourable interest rate before market changes.
Improve your credit score: A higher credit score increases the chances of home loan approval. Paying bills on time, reducing debt, and keeping credit card balances low can all help. Banks generally prefer scores of 610 or higher.
Save for a deposit: While some banks offer 100% home loans (especially for first-time buyers), putting down a deposit of 10–20% can improve the chances of approval and reduce long-term costs.
How tenants can cope
Tenants will likely see higher electricity and water bills due to the VAT increase. Looking for properties with solar power or other cost-saving features can help cut expenses. Other strategies include:
Negotiating rent: Some landlords may be open to discussions, especially for long-term tenants.
Exploring more affordable options: Moving to a lower-cost area or a smaller property could ease financial pressure.
Acting quickly: With more people looking for budget-friendly homes, being ready to sign when the right rental becomes available can prevent missing out.
Kohler said that although the South African Reserve Bank’s hawkish stance on interest rates have tempered expectations of significant cuts, consumer confidence in the housing sector remains the highest in a decade, with many investors and buyers still feeling optimistic about the future.
“However, with the muted VAT increase filtering through the economy in coming months, both buyers and tenants will need to adjust their strategies to remain financially secure in a market that is likely to experience rising costs and a shallower than expected interest rate cycle,” he added.
