Home affordability RIP

The final nail in the coffin of home affordability’.

That’s how Mike Bennett, Managing Director of Durban’s largest independent property group, ProProp, describes eThekwini Municipality’s proposed new rating system. He says the new system, which advocates home owners paying R0.009 for every Rand in the value of the property, will see rates in some suburbs rise by up to 140 percent.

“While the theoretical value of the rates increase is around 15 percent, in reality it’s in excess of 100 percent in some areas occupied by our new middle class — policemen, nurses, teachers and bank admin staff,” says Bennett.

“According to our matrix, the rates in randomly selected suburbs such as Caversham Glen will increase by up to 84 percent, Marianhill Park by up to 118 percent, New Germany anywhere from 91 to 124 percent and Pinetown from 96 to 142 percent,” he says.

Rate payers will pay

Bennett believes eThekwini Municipality’s recommendation that home owners across the board be exempted from paying rates on the first R120 000, regardless of market value, is merely a ‘smokescreen’. “It is intended to deflect attention from the harsh reality of a situation that I believe has its origins in imprudent spending for which the rate payer is being billed. Two examples quickly spring to mind — uShaka Marine World, which has cost millions in the last two years and Durban Transport which, though privatized in 2003, has also cost a fortune to keep afloat since then. I have no idea how many more millions or even billions the new sports stadium is ultimately going to cost, but you can be sure that the rate payers are going to end up paying for it too.

“Coming on the heels of the new Market Valuation on Property Rates (MPRA) which has seen residential property values increase by nearly 280 percent on average, it’s going to hit the pockets of thousands of property owners whose salaries are already marginalized by rising interest rates, living and petrol costs.”

The new system heralds the end of home ownership for many

Bennett says he fears the new rating system will herald the end of the home ownership road for many, particularly pensioners and those on fixed incomes. “The average home owner is already battling to put bread on his table after paying bond instalments of around R5000 to R7000 a month as well as car repayments, insurance, medical, schooling and petrol. Bearing in mind that one can’t get blood out of a stone, where does the municipality think these people are going to find an extra R500 a month? The problem is not the valuations of property — those are close to reality — but the Rand increase from previous rates to the Rand value of the new rates payment.”

Noting further that the proposed cent-in-the-rand rates for Cape Town and Johannesburg are R0.00459 and R0.005 respectively, Bennett says he would like to know how Durban’s higher rating can be justified. He asks whether it could be that Durban is not as efficiently run as Cape Town or Johannesburg. Ratepayers officially had until 31 March to object, but Bennett is urging them to stand together and protest.

“As a significant contributing force to the municipal coffers, we need to demand a more inflation-related increase. The way I see it, working on six percent inflation and another eight percent for municipal inefficiencies, this means the rate increase shouldn’t be more than 14 percent. The rate paying public has a right to know where their money is going and I believe that the eThekwini Municipality should produce and publish a detailed budget for their shareholders — the ratepayers — to study,” he says.

Average rates comparison (old rates in brackets):

CAVERSHAM GLEN (R2436): Increase of 84 percent to R4500
MARIANNHILL PARK (R3411): Increase of 118 percent to R7470
NEW GERMANY (R3769): Increase of 114 percent to R8460
PINETOWN (R2677): Increase of 142 percent to R6480

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Article from: www.iafrica.com