An already struggling and limping property market will be severely damaged should the Property Rates Amendment Bill become law without any further changes and it would sound the death knell for developers and investors, says Keith Wakefield, the of CEO Wakefields Real Estate.
This Bill which will see rates on rental properties more than double will stop residential development in its tracks particularly as the first to take up new build units, in some cases by as much as 50%, are investors. Developers and investors are of paramount importance to the property market. Without them there will be no properties to rent and those people who cannot afford to buy a home will face higher rentals.
Developers have felt the brunt of excessive rates on properties for years. Instead of encouraging developers by providing incentives to create more housing at all levels, government is driving developers away with legislation like this, said Wakefield.
A property market that is stagnant will ultimately mean a loss of income to the national treasury in the form of transfer duties, capital gains tax, and taxes on rental income.
Investing in rental property is one of the easier ways of creating wealth in the longer term. This legislation will shut the door on this and on many ordinary citizens trying to ensure they are able to live decently on retirement.
However, a holiday home that stands empty until used by the owner or a property that is used by in-laws or family and on which no rental is paid is not affected by this legislation.
It is inevitable that rentals will rise to as much as the market will absorb to cover this additional cost. At the lower end of the rental market those tenants who cannot afford to pay up will find themselves resorting to shacks. Alternatively it could exacerbate overcrowding as more than one family shares a small space and the rental.
Many people who bought property when the market was at its peak and were unable to sell because of market conditions were forced to let their properties to meet their bond and rates commitments or go insolvent. These people are now going to be penalised even further by being charged double rates.
When it comes to suggesting that the rates period should be extended to seven years from five this is totally unfair. If municipalities want to ride the wave of property booms and rake in additional income they should also take the fall when the market changes.
It seems that the law makers have not thought through the process nor do they understand the economics of the property market, said Wakefield.
The increased rates burden will also further ‘disincetivise’ Port Elizabeth’s local crop of ‘slumlords’ from restoring their buildings, such as Lampenhof in Central, leading to further decay and anarchy in historical and other areas.
