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What effect does the VAT hike have on rentals?

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It’s still early days since VAT was increased by 1%, but with landlords having to absorb resultant cost increases in all services received – from levies, rates and taxes, utilities, insurance, and maintenance – they are going to have to tread very carefully around rental increases.

Tenants, too, are not having the easiest time – with the VAT increase affecting their household budgets.

According to the TPN Residential Vacancy Survey for Q1 2018, average national rental inflation is 2.61% with vacancies sitting at 5.9% nationally – a quarter-on-quarter increase from 5.4% in Q4 2017.

“Although the national market strength index has dipped slightly from 59.5% in the last quarter of 2017 to 58.4% in Q1 of 2018, this is not necessarily alarming as it isn’t a result of weaker demand, but rather because the supply rating increased by slightly more than the demand rating – and hence reflected the net effect of a weaker market strength index,” said TPN in its report. “The fact that both supply and demand ratings are increasing should lead one to believe this points to a somewhat more active market in general.”

The woes of mining town landlordsmining outline

This is, however, not the case in some of the country’s prominent mining towns, where uncertainty in the mining industry is affecting both the supply of new rental accommodation and the sale of property.

According to Seeff agents in Mpumalanga’s towns of Lydenburg and Middelburg, as well as North West’s Rustenburg, developers seem disinterested in investing in these mining towns.

Anna-Marie de Jager, Seeff’s MD in Lydenburg, said that while their branch alone received an average of six applications per rental home priced between R4,500 and R6,500 per month – enough to secure a three-bedroom home with a small garden – developers feel the risk of ending up with vacant developments is too high because of possible market fluctuations and retrenchments.

“And while there is plenty of vacant land available for development, obtaining services from the municipality is another consideration for developers,” she said.

Some 400km away, the mining town of Rustenburg currently has a massive oversupply of homes for rent and for sale.

This is according to Elsje Stander, Seeff’s MD in Rustenburg, who said that where the mines rented private houses for some employees in higher positions in the past, they have given these houses back in mass and are selling their own houses following staff retrenchments.

This has resulted in an oversupply of stock and sellers who are desperate to either rent their properties or to offload altogether.

Shockingly, Stander said, “We often find that sellers are willing to accept just the outstanding amount on their bond when selling their homes.”

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david.steynberg@gmail.com

David A Steynberg, managing editor and director of HomeTimes, has more than 10 years of experience as both a journalist and editor, having headed up Business Day’s HomeFront supplement, SAPOA’s range of four printed titles, digimags Asset in Africa and the South African Planning Institute’s official title, Planning Africa, as well as B2B titles, Building Africa and Water, Sewage & Effluent magazines. He began his career at Farmer’s Weekly magazine before moving on to People Magazine where he was awarded two Excellence Awards for Best Real Life feature as well as Writer of the Year runner-up. He is also a past fellow of the International Women’s Media Foundation.

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