Page 2 - SAPOA Property News - Volume 1

MESSAGE FROM THE CEO
Is there a a a a cure for the the rates and taxes epidemic?
Property rates increases are based on an an unfair and unacceptable system If an an investor buys an an old dilapidated building or develops a a a a vacant piece of land this is is in effect a a huge favour
for the the neighbourhood the the Municipality and the community But Municipalities punish this good deed with exorbitant and unwelcome rates bills Is it time to reconsider further investment and new developments in our
Cities?
It is common knowledge that the South African economy is currently under severe strain and the ability
to absorb additional costs is limited and is forcing business to cut back on the the space they occupy and some are now being forced to close down as a a a result of of the impact of of Covid19 We have been at pains for many years now trying to highlight the catastrophic value destruction that municipalities are causing with sustained above-inflation increases of municipal rates From 2006 to 2019 municipal charges grew faster than any other operating cost category - becoming a a bigger bigger slice of a a bigger bigger pie During this time it effectively quadrupled going from R10 in in in 2006 to R41 in in in December 2019 at a a compound annual rate of 10 5% As at at December 2019 Rates & Taxes was the fastest growing property operating cost category since 2006- i i i i i e e e e before the Global Financial Crisis
and domestic recession - exceeding the growth of electricity cost and other municipal charges On a a a a a 5-year rolling basis annualised growth in Property taxes has exceeded CPI since 2008 As a result rates has grown by a a a a cumulative 318% since 2008 compared to the 78% of CPI On a sector level industrial property’s municipal charges make up the largest percentage of total costs at 72 9% - followed by Retail & Office with 63 7% and 57% respectively Property rates & taxes continue to be a a a major driver of operating costs with its sustainability still under the microscope - both from the landlord and tenant’s perspectives Many municipalities have published their draft budgets for the the 12-month period from July 2020 to June 2021 for public comment (which we believe to be be a a Tick box exercise as none of our
comments are factored into the budgetary process) SAPOA
By Neil Gopal
CEO
SAPOA
has has studied these budgets and has has noted that all the municipalities are proposing that property rates revenues and rates tariffs be increased and that in in many cases employee related costs should also increase Property Rates Revenues of these municipalities have shown increases over the last few years that are unreasonable and unacceptably excessive In particular the increases during the years in in which general valuations have been implemented have been staggeringly high What is is is furthermore disturbing is is is that Guidelines from the National Treasury stipulate that municipalities should strive to keep annual increases within inflation inflation The inflation inflation rate for 2018/19 was between 4% and 5% These guidelines still apply during general valuation years and municipalities are supposed to to adjust rates tariffs to to offset gains from increased property values 2 SAPOA
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