Letters to the Editor

Surge in the real estate industry imminent

Thursday, March 14, 2019

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Dear Editor,

Oh, what a remarkable day it was on Thursday, March 7, 2019 when Dr Nigel Clarke, finance and public service minister, presented the 2019/20 capital expenditure budget.Two noteworthy tax cuts were the transfer tax and stamp duty which are both paid in real estate transactions.

Stamp duty, which is currently four per cent of the value of a property for sale, is to be reduced to a flat fee of $5,000; and transfer tax, which is five per cent of the said value, is to be reduced to a low two per cent.

To understand the significance of these reductions, let us look at their operations in a transaction for a property selling at $30 million. Transfer tax here is a screaming $1.5 million, and this is paid by the vendor alone; and stamp duty is $1.2 million, and this is shared by both parties.

Due to these exorbitant taxes in real estate transactions the purchaser is expected to pay a deposit of 10 per cent of the purchase price for the property he/she wishes to purchase upon signing the agreement for sale as all taxes are paid from the deposit to prevent the vendor from having to dip into his pocket to help finance the transaction.

From the abovementioned, it ought to be evident that the transfer tax and stamp duty alone are nine per cent of the value of the property; therefore, to the dismay of many purchasers, this 10 per cent deposit is non-negotiable.

Many individuals are unable to purchase their desired property due to this non-negotiable deposit, which they pay out of pocket, as even where their mortgage is enough to cover the entire sale they cannot access same until the deposit is paid and agreement for sale duly executed.

With the reductions which are to come into effect on April 1, 2019, a house selling for $30 million will necessitate $600,000 for transfer tax and a meagre $5,000 for stamp duty. Unbelievable isn't it?

It gets better. The domino effect of these cuts are that purchasers will now be expected to pay no more than five per cent deposit when purchasing a property.

From now forward, we can expect a surge in real estate transactions as more vendors will be motivated to sell their properties and more individuals will be able to purchase and to amass their deposit.

Chantel Howell

Partner — Howell, Johnson & Lawrence

Kingston 10

howelljohnsonlawrence@gmail.com


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