Tax incentives for urban development in Cape Town
Property buyers interested in real estate in Cape Town can benefit from a number of incentives including tax advantages in the city’s Urban Development Zone, it is claimed.
Cape Town is popular with travellers and buy to let property investors are seeing it as having potential. The city was recently voted the number one Metropole in a Traveller’s Choice survey alongside Sydney, Machu Picchu in Peru, Paris, Rio de Janiero, New York, Italy London, Barcelona and Hong Kong.
In the UDZ, the purchaser can benefit from substantial tax incentives on income, subject to conditions, and developers are promising guaranteed 7% returns for 12 months.
They are also predicting good capital appreciation as the bustling area is attracting well-known brands such as The Hilton hotel group.
‘In popular cities like New York, Paris, London, and Amsterdam the CBD is the most expensive per square meter. Cape Town is slowly catching up. At the moment purchasers are getting excellent value for money as well as various tax incentives for investing in the UDZ,’ said Audrey Matthews, director of Ronnie Matthews Estates.
The rejuvenation of the city centre began in 2000 and such has been the success of the project that it has been recognised as an example of best practice in terms of urban regeneration.
Developer Dino Cooper, who has just completed the conversion of the fifth and sixth floors of Elkay House at 186 Loop Street into two units and a penthouse, said being able to take a shell of a building and turn it into a living space has worked well.
‘We identified the potential growth in this area five years ago. The gentrification of this area together with its classification under the Urban Development Zone with the associated tax concessions make this a superb investment,’ said Cooper.
‘The tax incentive for being part of the UDZ is a massive, entitling the purchaser of a unit to a 55% of the purchase price against South Africa income. Apart from the tax rebate on the unit, for the price of R11 million duplex and apartment you are getting around 400 square meters of prime property including two parking bays in the building with a guaranteed return of R770 000 for the first year,’ Cooper added.
The tax incentive can be structured in a number of ways and the buyer would need to consult their tax advisor or accountant. The tax concession helps reduce the taxable income of the investor and is not limited to the taxpayer’s current year’s taxable income. If it is not absorbed in any tax year it can be carried forward as an accumulated tax loss until fully absorbed.
The 395 square meter penthouse has 360-degree views from both the large wooden deck and the living area including Table Mountain and Lion’s Head and offers privacy within the buzz of inner city living.
The deck includes a marble bar and a swimming pool, jacuzzi and external shower. All the fittings, finishes and appliances are top of the range.