Do you own more than one property? Get ready to pay more on rates!

[DenSweeP]

Alarm over property rates bill

A new bill proposes homeowners should pay commercial property rates on additional houses - and tenants may be burdened with the extra costs.

Estate agents, resident associations, the City of Cape Town and the provincial government have slammed the Property Rates Amendment Bill as shortsighted.

The bill seeks to redefine residential property and its effect would be that those who own more than one home would pay commercial rates for their additional properties. Commercial rates are higher than residential rates.

"You have to question whether this bill has been properly thought through," Seeff Properties chairman Samuel Seeff said yesterday. "The government dropped the rates on transfer duty. Now it wants to penalise people who have more than one property. This bill will mean there is no incentive to purchase a second or third property."

He said if the bill was approved, it would have a detrimental impact on the property industry.

"The big problem is that the cost will ultimately be borne by people who rent. It will put a burden on the man in the street who is already crippled by other increases such as electricity and fuel. We will request further investigation into this bill. We will certainly oppose it," Seeff said.

Local Government MEC Anton Bredell said a law that demanded homeowners pay commercial rates would be "incredibly" difficult to implement. There would be no incentive for people to buy or build additional homes to let out.

"This does not make sense. Eventually, it is the poor who can't afford to buy a house who will bear the brunt of this because homeowners will simply pass on the costs," he said.

Bredell said rebates should be considered for homeowners who rented out their additional properties.

Cape Town deputy mayor Ian Neilson said it should be left to the municipality to decide residential and commercial property rates. He said the city had over the last few years reclassified properties such as residential flats and old age homes so that they could pay residential property rates rather than commercial rates.

"We looked at the actual usage of those properties and we thought of a way that was fairest. The trouble with this (bill) is that it says residential property means property used primarily for the owner's residential purposes. It excludes use of property the owner has acquired for commercial gain," Neilson said.

He said the "shortsighted" bill seemed to target the rich, but "the extra cost is just going to work its way to the tenants ... The question is also how do you implement it? What happens if the owner of a property has property in another municipality? It will take years to get this right."

Regarding municipalities lacking the capacity to apply the bill, he said: "It seems you will have to rely on the honesty of the owners. We should rather have a system that is simple and that treats owners and tenants equally. This will hit tenants really hard."

Raymond Williams, chairman of the Rates Board Association, said: "Government is milking our people. The end result of this bill would be tenants not being able to afford rent."

Co-operative Governance and Traditional Affairs spokeswoman Vuyelwa Qinga Vika did not return calls.

Interested parties have until Friday to comment by fax to 012 334 4811 or by e-mail to mpra-AT-cogta.gov-DOT-za

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Source

So, who owns a second property here? And how will this affect you?

[simon]

I guess it is a good thing that my mom managed to sell her house in Port Elizabeth recently, other house in Cape Town is still ours

[matt]

The government just wants to milk taxpayers more and more. It just means that poor people will be even less able to afford housing because rent will go up, and people will rather invest in other assets than property. I just wish they would think things through before coming up with these schemes

[Ichigo]

My gran owns 4 houses in Cape Town so she might have to increase her rent to cover the rates

[Tinman]

When I first read about this I freaked out. But I'm starting to think it kind of makes sense.

"We looked at the actual usage of those properties and we thought of a way that was fairest. The trouble with this (bill) is that it says residential property means property used primarily for the owner's residential purposes. It excludes use of property the owner has acquired for commercial gain," Neilson said.

That seems kind of fair. People who rent out property are generating income from it, and in that sense their additional property opperates as a kind of business. Zoning it as such seems reasonable.

The obvious concern is that it will drive up the cost of renting. However, won't it deflate the property ownership market?

The bill makes renting out property more difficult, and probably less appealing. Won't people be less inclined to purchase multiple properties? And if so, won't property values decline with lower demand, making it possible for more ordinary people to become owners?

[czc]

Problem is that they are also paying tax on rental income.

[Crzwaco]

Your not a contract worker I take it Tinman?

[DenSweeP]

When I first read about this I freaked out. But I'm starting to think it kind of makes sense.



That seems kind of fair. People who rent out property are generating income from it, and in that sense their additional property opperates as a kind of business. Zoning it as such seems reasonable.

The obvious concern is that it will drive up the cost of renting. However, won't it deflate the property ownership market?

The bill makes renting out property more difficult, and probably less appealing. Won't people be less inclined to purchase multiple properties? And if so, won't property values decline with lower demand, making it possible for more ordinary people to become owners?

Interesting point you make, but what about folks who rent out properties and don't actually make a profit? Who still have to pay in on the bonds or the lucky ones who break even? Or what about someone who has a beach house and doesn't rent it out?

I hear your argument and agree to a degree, but can't help but feel that this is simply a cheap way by government to make more money off hard working citizens. But as with all things that get moaned about by everyone, but nothing gets done, people will simply fork out the extra cash and increase their rental prices. In the long run, I don't think this will have as big an impact on the selling market as they predict. Property will always be the best way to invest and thus people will suck it up and fork out the cash.

[JuiceCHKNHD]

I don't see how they're going to enforce this. What happens when the tenant gets their own rates bill in their own name rather than the name of the actual owner? How are they going to determine whether the owner is living on the property as a primary residence or not? And it's not as if owners of multiple properties don't ALREADY pay capital gains tax on the proceeds of the sale of their second property.

Juice

[HavocXphere]

Practically flawed:

• No mechanism to reliably enforce it
• Use can change multiple times a year & the IT system will probably need a few BEE tenders to cope with that
• Requires cross municipality cooperation

Fundamentally flawed:

• Costs trickle down to the end consumer
• Already heavily taxed via CGT
• Entirely counter productive. We want people to save more, via property or otherwise.

The last point is the worst of the lot. Half the ANC says save more the other half is drafting bills to punish those that save. Another ANC sponsored disaster in the making.

People who rent out property are generating income from it, and in that sense their additional property opperates as a kind of business.

Not the same thing. Real businesses are already favoured via the tax structure which is different for business vs people renting out. You could transfer the prop to a business entity, but then you get hit with *hardcore* CGT (and again when you try to get the cash back out of the entity).

Zoning it as such seems reasonable.

They just want to apply a different rate, not re-zone it.

The bill makes renting out property more difficult, and probably less appealing. Won't people be less inclined to purchase multiple properties? And if so, won't property values decline with lower demand, making it possible for more ordinary people to become owners?

Kinda. The effect will be fairly minimal though. Plus I'm not particularly keen on anything that rattles the property market or the interest rate. It tends to take the entire economy with it (think US subprime).

On a side note, you okes much watch the UK property market long term...its going to blow up nuclear style worse than the US imo. Thats a long range (20 years) forecast though.