Real Estate Investor Magazine South Africa July/August 2019 | Page 34

ACQUIRING
The caring economy
Parents are assisting their kids to finance their new home
T
here is a growing trend of parents willing to lend a
helping hand to their children when they are purchas-
ing their first property – from gifting a deposit, an in-
terest-free loan, buying in a trust or by acting as surety for
the loan. The older generation is stepping into aid first time
property buyers. Entering the property market can be chal-
lenging for the younger generation of first time buyers due
to their lack of finances, experience and
savvy.
Any part of the donation greater than R 100 000 is taxed at
20% in order to comply with the Donations Tax with the scale
sliding to 25% on the donation amount that goes beyond R30-
million.
Parents may choose to purchase the property outright on
behalf of their children with the written or verbal proviso that
they repay the amount monthly at a
much lower interest rate or sometimes
With an increased general cost of without any interest added to the
amount. Parents gain an asset
living and a fluctuating economy, capital
temporarily, while children learn
we are seeing more cases of
the responsibility of committing to
parents assisting their children monthly repayments. Parents can also
be more understanding should you
to take that step and pave the
not be able to repay the entire amount
way to their independence.
due to unforeseen circumstances and
Youngsters sometimes face the unplanned expenses.
“
Greeff explains that due to several
factors there has been a visible trend of
parents helping their children to bring
their property dreams to a reality.
challenge of not having a credit
record or struggle to come up with
the deposit for their first home.
Parental intervention gives them
added stability and the security
of knowing that they have the
support of their families.
“
CEO of Greeff Christie’s Interntaional
Real Estae, Mike Greeff shares his
thoughts on the trend of generational
property collaboration. “Part of being
a parent is the desire to do the best for
your children and to give them the best
possible foundation in life. Seeing your
children become property owners gives
you a feeling of accomplishment and
pride,” he said.
Greeff Christie’s International Real
Estate Area Specialist in Claremont
Upper and Kenilworth Upper, Charles
Silbert comments on the trend. “It is
sometimes easier for parents to just
be the safety net for their children’s
property endeavours by signing up as
surety for the loan.”
“With an increased general cost of
living and a fluctuating economy, we are
seeing more cases of parents assisting their children to take
that step and pave the way to their independence. Youngsters
sometimes face the challenge of not having a credit record
or struggle to come up with the deposit for their first home.
Parental intervention gives them added stability and the
security of knowing that they have the support of their families.” Silbert is currently busy with a sale where the parents
are giving financial assistance. “We are certainly seeing an
increase in the trend where parents are assisting their children.
Currently this is happening by way of parents acting as surety
for the bond their child is trying to secure and are paying the
balance of the purchase price,” he explains.
While it may be an amazing act of kindness for parents to
gift their children the deposit for a new home, parents should
keep in mind that the South African Revenue Service (SARS)
only allows up to R100 000 per year as a donation. Getting into the property market may seem like a challenge
that most of the younger generation feel are impossible to
achieve, but with a little help from their parents or the older
generation, buying a home may be well within their reach.
RESOURCES Greeff Christie’s International Real Estate
32
JULY/AUGUST 2019 SA Real Estate Investor Magazine