Visit our COVID-19 site for latest information regarding how we can support you. For up to date information about the pandemic visit www.sacoronavirus.co.za.

bs-regular
bs-extra-light
bs-light
bs-light
bs-cond-light-webfont
bs-medium
bs-bold
bs-black

Community


Share knowledge. Ask questions. Find answers.

Online Share Trading

Engage and learn about markets and trading online

Buying a house

Reply
Blik
Super Contributor
Ok a general question or two. I am thinking of buying a house to live in. I am currently otherwise accommodated and would like to change this. I will need to sell some of my share portfolio to buy a house. Ok, so questions: what do I sell? Do I sell the dogs and keep the winners or do I sell proportionally across my board? Do I keep the big dividend payers? My current feeling is to sell the dogs and keep the big DY payers. Then sell the rest of my portfolio completely.
My following question relates to the 3 Tax year rule. Some of the shares I will need to sell I have held for less than three years. My intent was to keep them long term, but necessity means I need somewhere to live. Would SARS consider effectively transferring a potential long term share investment to a house (investment), based on similar intent and be happy to tax me on CGT? Or is the 3 year rule strictly applied? Has anyone had experience with this?
0 Kudos
25 REPLIES 25
Not applicable
the 3 year rule is not a strict rule, theres more to CGT than simply 3 years. In actual fact the law states 5 years, but how it works in practice is simply there are several factors to consider, how long youve held them is only 1 consideration.

If you dont trade often, and your investments are seperated from your trading account, then it is possible to have shares for less than 3 years.
Ive sold shares held less than 3 years because my intention changed.

Generally though, best advise is to more likely sell the dogs, dont know which shares you have but thats prob the best general advise.
Cut the losers let the winners ride.

Good luck
0 Kudos
SimonPB
Valued Contributor
sell the dogs, always
0 Kudos
Rams
Super Contributor
if your portfolio is doing more than 10%, and your bond is less than 10%, then don not sell your shares...but i agree, especially for the deposit, get rid of the dogs. This is assuming you have income to service the bond.Alternatively sell only as much as you need to qualify for the bond and be able to service it...tax issue not relevant if you selling the dogs..
0 Kudos
Oom_Boom
Frequent Contributor
Popular wisdom dictates that you sell all your shares in order to finance the house. The thinking behind it is that it is better to pay off your debts before investing. I disagree with this. Many years ago we bought a house. At the time I was still investing in unit trusts ( the top 40 trackers) I kept the UT and the growth in that outperformed the interest rate on housing, and a few years later I cashed in the UT and almost paid off the bond. If I had followed conventional wisdom I would not have been able to do that. I say keep the winners and cut the dogs, especially in this low interest rate scenario we have now. If interest rates rise drastically you can rethink your position and sell shares and pay into the bond, so you willl have that flexibility to fall back on. Enjoy the househunting, it is a very enjoyable time in your life!
0 Kudos
Blik
Super Contributor
Many thanks - always good to tap the forum advice - sometimes I donÂ’t think we (the forum) always appreciate what a resource this is. While I have pretty much made my decision, run the numbers etc, I am always interested in what people have to say. Very often someone has already been there and done that.
I'll be selling the dogs - BDM top of the list followed by Pallinghurst! I am going to keep some of my higher DY (SOL, BTI, CCL and SPP) shares, and pump the divs back into the bond. I aim to pay the bond off in 5-8 year maximum.
Certainly my intent was to invest - I donÂ’t trade at all in my investment portfolio - I limit my limited trading to my trading account. So I hope I am safe there.
@Rams – I am certainly going to have to sell something. My portfolio might be doing better than 10%, but I still need to put down deposits and such. I pump everything I have into shares, so need some cash. I aim to sell about 70% of my portfolio for this. Time to build again after, but at least I’ll have a lekka place to live.
0 Kudos
kwagga
Super Contributor
Ja, always a problem to know how to slice the cake - and there is never enough. Fortunately you have a cake to slice. I'm kinda in the same situation, but looking to buy a second property. My situation is a little better in the sense that I'll be buying a long term income stream with the second property, and it will finance about 55% of my new bond after taxes. So, I'm hoping to pay the new bond off in 6 years time, but saying that, it will limit what I can push into my portfolio severely over that period. So my decision was to keep 25% of my portfolio and push the rest into the new property. That way I'm at least diversified. The issue I always have trouble with to get my head around is the "that if scenario" in the portfolio environment ? The potential to make a lot of money will always be there in the stock exchange, but I've come to know myself in the sense that I know I'm a great saver of money with a good monthly budget practice, but I'm not that great when it comes to sticking with a long term portfolio plan. Buying property seems to be the best scenario to keep me to a long term regimen.
0 Kudos
THRESHOLD
Super Contributor
Shares are the better asset class. Logic dictates that you should look to sell the shares that the house most closely approximates (or "replaces") as an asset class ie. your property shares. Know that the house is a huge vote of confidence in South Africa Inc. - so dispose of shares that have the same characteristics eg. retail shares.
0 Kudos
Blik
Super Contributor
Muchos thanks for all the comment
0 Kudos
Oom_Boom
Frequent Contributor
Kwagga, I am also looking at another property to add to my exhisting, so we are very much in the same boat. The listed property companies are in my opinion a better option than buying a residential flat/townhouse, it is fully managed and diversified and totally passive, no tenants crying about the power being off (look out the window, do you see that your neighbours also don't have power?) and worst no tenants skipping out on you. The reason I am still looking at property is that the bank will lend you money to buy it, they don't lend money to buy listed property shares. (If I am wrong on this PLEASE let me know who lends money for shares).
0 Kudos
Preston
Super Contributor
My advise is to keep the dogs and sell RAMS.
0 Kudos
Preston
Super Contributor
On a serious note, sell a combination of your winners and losers, so that your net capital gain position will benefit.Also take advantage of the annual capital gain rebate of R30000, so that your cash flow position is improved.
0 Kudos
SimonPB
Valued Contributor
they won't lend to buy listed property (well you do get variable strike warrants from Investec which lend you a bit) .. but the property stock ahve debt, so much the same, except they much lower geared then an individual would be
0 Kudos
WES
Super Contributor
Why buy a house ? Rent it. Put money in shares. The municipalities in this country is bankcrupt, they have to raise rates and taxes to survive. Property also not liquid and cost to get into and out of property is high, interest rates can only go UP from here. Unless it is a massive bargain, I won't buy.
0 Kudos
samoa
Super Contributor
Wes my opinion exactly.
0 Kudos
Blik
Super Contributor
Good question - but tis a personal lifestyle decision. I like the idea of owning a place I can call a home, restore or build the way I want to without having to inform a landlord. I have been investing for 11 years and living in dingy places, its time to enjoy a little bit of the fruit I guess.
0 Kudos
mullet_fish
Regular Contributor
Be careful with SARS - not worth the headache taking a chance
0 Kudos
kwagga
Super Contributor
A paid property opens other opportunities. When you rent your options are limited.
0 Kudos
Rams
Super Contributor
rent or buy?...i am not into derivatives except for ALSI futures intraday...so the beauty of the Access Bond...pay less than prime on your bond, and trade making more than prime, the difference is put back into the bond...but need lots of discipline and good trading plan...its all about leverage and using it to your advantage
0 Kudos
Not applicable
I know you would like to be able to call the house your own but in reality what does it matter if it belongs to a bank or to a landlord? You use it as your own anyway. I think that its better to rent your primary residence. You should be able to find a house to let for a lot less than what a bond repayment will cost you. Especially if you are looking for a little more upmarket housing. Then invest the difference between the bond and rent into entry level distressed buy to lets with no or very small shortfall. All structured in a property trust. That is just my opinion though and you should do what makes most sense to you and your situation.
0 Kudos