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12 October 2007
New municipal property rates to cause havoc The spectre of the new municipal rates – in the process of being promulgated by many local councils nationwide – is going to have a severe affect on the property market and is likely to damage the value of the property market, to the extent that some property owners will be forced to sell, said Christopher Riley, MD of online property company, www.RENTALS24.co.za. “The property market cycle has shifted during the past few months and has now become a buyer’s market. People are taking longer to sell their properties. House prices rose 5.7% year on year last month and there is definitely a cooling off in the property market. Although property should be viewed as a long term investment in most instances, the looming introduction of the government’s new municipal property rates is going to have a tremendous affect on the property market. Already there are reports where some property owners are paying as much as 300% more for rates and taxes. This could be disastrous for the property market.” He said another worrying backdrop is the escalation in anger and frustration due to lack of sufficient speed in the governent’s land claims implementations. “New laws are not always good laws and I am fearful that the new municipality rates championed by the government are going to have a negative affect on property values. Additionally, there is a growing militancy from a grassroots level as people on the ground are getting more and more frustrated at the alleged slow pace of land reform. There is already talk that land settlements will, in the near future, not be conducted on the basis of willing seller and willing buyer. That, too, is unsettling – and overseas investors are surely going to take cognisance of this.” Riley pointed out that the Zimbabwean government recently passed a moratorium on rent increases in that country. “What I am saying is that new laws are not necessarily good laws. If people re coerced into selling land on an unfair commercial basis this is gong to create a great deal of strife in the economy. The same goes for the new municipal rates. The government seems to think it is an equitable rating system, but how can it be if a property owner suddenly has to pay 300% more for rates and taxes?” Org Geldenhuys, a director of property development company Abacus Divisions said that while there is still buoyancy in the commercial property market, the residential market has “certainly cooled off”. Although Abacus Divisions focuses more on the commercial property sector, Geldenhuys did say the new municipal rates are going to have a “profound affect” on the residential property market and commercial property markets. For one thing those property owners who are renting out property are going to be forced to increase rentals if their rates and taxes are dramatically increased – this includes commercial property owners. There has also been a lot of concern from the agricultural sector, which is complaining that the new rates are making it unviable to own and farm agricultural land in certain municipal areas. Indeed the new rates are creating a situation, in some regions, where it is not viable for certain farmers to continue farming as some are paying taxes that now amount to tens of thousands of Rands a year - or more, in some cases. It is all good and well to try and level the playing field and to come up with an equitable system for all property and landowners, but when, on the ground, there are serious inconsistencies – or where there are huge hikes – one runs the risk of seeing the bottom falling out of the property market, whether it be with regards to residential homes, smallholdings or farms.” Property expert Erwin Rode from Rode and Associates said that while the residential property prices had now cooled off, offices and industrial property were nowhere near their peak. They still had a lot of potential for growth. Only 3.3% of office space in central Johannesburg is currently standing vacant, 2,2% in central Pretoria, 2% in central Durban and 2.9% in Cape Town. |