Real Estate Investor Magazine South Africa July 2014 | Page 38

INSIGHTS

BY MONIQUE TERRAZAS

Pulse Of The Property Industry

Commercial property insights

I

n June, more than 1500 local and international
delegates attended the 46th Annual International
Convention and Property Exhibition, entitled
“Making a Difference” in Cape Town. The delegates
were welcomed by the Honourable Mayor of Cape
Town, Mrs Patricia de Lille, followed by number of
sessions that raised important issues impacting on
South Africa’s property environment.
Certainly among the most pressing issues addressed
is the impact of rates and taxes imposed on by South
Africa’s local municipalities on the property industry.
According to SAPOA, the yearly increases in
municipal rates, taxes and services have impacted the
South African economy to the tune of 4,500 lost jobs,
as well as lost economic output of some R2.8 billion.
As a result, SAPOA have appointed Rates Watch,
in partnership with the University of Pretoria, to
investigate municipal budgets.
The findings indicate that medium-term growth
in property rates in SA’s metropolitan regions has
ranged from 4% to 11% a year over the past four to
five years. The weighted average growth in property
rates was 6.7% a year. The highest increases were
seen in Nelson Mandela Bay at over 11%, followed
by Mangaung at 10.97% and Tshwane at 10.75%.
The lowest increases were posted in Ethekwini,
Polokwane and Ekhurhuleni at 4.3%, 5% and 5.6%,
respectively. The ratio of rates and ta xes varies
widely across the country. Perhaps the most striking
observation reported is the inconsistency of property
valuations, especially in the residential sector, where
properties are most often under-valued.
High-level industry leaders discussed the issue at the
conference during a panel discussion entitled ‘Property
Rates and Taxes: Making cents of it’ and concluded that
these annual increases were inflationary and contradict
the aims of building the economy of the cities and creating

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July 2014 SA Real Estate Investor

jobs. If the high rates and ratios inhibit SA’s economic
policies, it would be in contradiction of the Constitution.
wAnother main theme at the SAPOA Convention
was the economic impact of the property sector on the
South African economy.
Commercial property in South Africa contributed
R81 billion to the South African GDP in 2012. This
means that South Africa’s economy and the country’s
fiscus benefited to the tune of R25.3 billion in taxes –
extending to transfer taxes in property transactions and
monthly rates and taxes.
T he v a lue of proper t y t ra nsac t ions (d i rec t
e x p end it u re), see s t he com merc ia l prop er t y
industry come in at just under R44 billion, while
the residential property industry recorded just over
R46 billion. Refurbishments and
upgrades of properties injected R6.8
bi l l ion into the economy and generated
R1.1 billion in taxes for the fiscus.
Will Gordhan come to the rescue?
I n cre as e d r ate s o n p ro p e r t y an d hike d
taxes in general are partly a consequence of
mismanagement. These increased rates at municipal
level were having “an enormous effect” on the
property market. If the increased levies on sectional
title properties, for example, were not absorbed
by the owners, they had to be mopped up by the
tenants. “This applies to residential, industrial
and commercial property and adds to inflation
ultimately,” notes Bill Rawson, Chairman of Rawson
Properties, who believes that former finance
minister and now newly appointed Cooperative
Government Minister, Pravin Gordhan, is the right
man to turn back the tide in local government and
restore good governance, and this in turn will have a
ripple effect on the property market.
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