Holiday home rates law shock

2011-07-19 00:00

A PROPOSED amendment to the Municipal Property Rates Act, recently published in the Government Gazette, will — if passed — have a serious impact on people who rent out homes on the South Coast.

Owners who use their residential property to generate a rental income will have to pay rates on their rental homes that are calculated at a much higher business rate.

Property experts said the amendment will push a flood of homes on the market, undercutting prices and pushing rentals to unaffordable levels.

Gaby Frey, owner of Gaby Frey Real Estate, said a large proportion of properties on the South Coast are second homes that are rented out to holiday- makers during school vacations and contribute greatly to the local economy and tourism.

“The South Coast holiday towns are already suffering as a result of the recession.

“If owners’ rates are increased then they would have to increase the tariffs on their holiday rentals, making it unaffordable to holiday makers.”

Frey said it will also impact the real estate market as a major driving force in the economy of the South Coast.

If the bill is approved it could see sales in the market plummet. “Not only will people not be buying property, but many people will be overloading their properties as they would not be able to keep up with the raised rates,” Frey added.

She said pensioners who have invested in second or third homes for their pension or retirement schemes will also be affected. “Many people on the coast invest in property as a measure to secure their own retirement and not become a burden on the state. These people cannot afford to pay this increase and it will be a substantial increase, which raised rentals will not even cover,” Frey adds.

Said Ivan Naidoo, president of the South Coast Chamber of Commerce and Industry, “The chamber will certainly not support the institution of this bill. Business and other organisations on the South Coast share our opposed sentiment as this would have very negative impacts on business and people in the area.”

Naidoo said the bill would compound an already difficult financial situation that many people are faced with. “The impact of this draft bill has not been thoroughly researched. It has a rippling effect that would impact the owner, the tenant and the economy.

“It would definitely contribute to inflation and cause people to lose their income base.”

Naidoo said exorbitant rates on a second home should not be seen as a luxury surcharge.

Objections to the proposed amendment can be lodged before July 22. They should be faxed to 021 334 4811 or e-mailed to mpra@cogta.gov.za

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