Johannesburg - The proposed
amendment to the Municipal Property Rates Act recently published in the Government Gazette
could sound the death
knell for the residential rental property market.
experts have said the amendment also represents a serious threat for the rest
of the housing market – and could put property prices under serious pressure.
property will probably also have to pay more.
of the amendment a property used to house people other than the owner for
financial gain will, in terms of property rates, no longer be assessed as
amounts to is that investors in residential property who let the property will
in future be assessed at the much higher business rate instead of the
Espach, a property valuer and expert in municipal property taxation, said the
amendment would result in a significant rise in property rates.
property rate for a person letting a Johannesburg property worth R1m will rise
from R372 a month to R1 533. In Pretoria the rate for a property with a
similar value will rise from R622 a month to R2 015.
Town that for a R1m property will increase from R375 to R935.
experts reckon the proposed amendment could lead to at least two worrying
who bought property to let could flood the market with their properties because
the additional expense no longer makes it worthwhile to let the property.
Pretoria letting a R1m house currently receives between R6 000 and R7 000
in rent. If he has to cough up an additional R1 400 for rates, his yield is
certainly no longer worthwhile.
units could further swamp the property market, which already has a significant
oversupply of houses. Prices would come under pressure.
could try to pass the rate increases on to tenants, making rentals unaffordable.
households are forced to rent these days because their financial position does
not allow them to buy.
Associates property valuer Erwin Rode said the amendment is unfortunate as the
country needs a powerful letting market with a segment of the population preferring
to rent a roof over their heads than to own it. He said renting also afforded
the workforce mobility.
the amendment would discourage owning a property for purposes of letting it,
which could be the death knell for the rental market
for property for the purpose of letting seriously declined after downturn in
the housing market.
to First National Bank’s property barometer, the number of properties purchased
with a view to letting them was a mere 8% of total sales in the second quarter
of this year.
stage more than a quarter of all property was sold to investors.
Golding, chief executive of Pam Golding Properties, said the amendment came at
a time when the residential property market was staggering under a profusion of
negative factors and regulatory issues.
believed the biggest threat was that additional stock would come to the market
while there was still an oversupply.
Properties chairperson Samuel Seeff said the amendment would deter investors
from entering the rental market. This could eventually negatively impact the
entire property market.
der Merwe, a property attorney at VFV Mseleku, said the investor market is an
important part of the residential property market because investors set many
developments in motion by buying the properties off plan.
property analyst John Loos said the initial impact on the tenants would be
negative, because they would have to absorb most of the additional cost. But
Loos believed that in the long run there would be a limited supply of rental
properties, which would be positive for rent increases.