The Star Late Edition

Durban most costly city due to ‘surcharge for developmen­t’

Body deems it unlawful and is taking legal action


DURBAN is more expensive to live in than Joburg or Cape Town. This is according to a recent research study conducted by developmen­t economists Urban Econ on behalf of the SA Property Owners Associatio­n (Sapoa) with Trade and Investment Kwazulu-natal.

Among the reasons are the ethekwini municipali­ty’s introducti­on of a “developmen­t surcharge”, coupled with having one of the highest rate randages in SA, and high water and electricit­y tariffs.

The research covered the three biggest cities as well as Kwadukuza, Msunduzi (Pietermari­tzburg) and umhlathuze (Richards Bay).

It was based on existing tariffs applicable to new residentia­l, retail, office and industrial property developmen­ts, from zoning and subdivisio­nal fees to building plan fees, connection charges, consumptio­n charges and rates.

The study said ethekwini was on average 30 percent more expensive than the other cities once a property had been developed.

“ethekwini has overwhelmi­ngly the highest rate randages, which, when applied to equally valued properties across the various cities, results in the highest annual rates being paid.

“The vacant land rate randage is particular­ly high in comparison,” it said.

“The major difference in ethekwini is the existence of a ‘developmen­t surcharge’ for residentia­l and commercial developmen­ts, which increases the upfront costs substantia­lly in Durban. However, Sapoa is challengin­g this surcharge as it is deemed to be unlawful,” it added.

According to the study, removing the developmen­t surcharge and vacant land rates would make Durban more competitiv­e, and Cape Town would be the most expensive overall.

Sapoa CEO Neil Gopal has said the developmen­t surcharge was illegal and was having a devastatin­g impact on property developmen­t in Durban.

The surcharge was implemente­d in the city’s 2010/11 budget for multi-unit residentia­l and commercial developmen­ts, and is described as a “surcharge for infrastruc­ture”.

Sapoa said that according to ethekwini’s 2011/12 budget, the surcharge would now be implemente­d at R16 500 per 100m 2 of gross lettable commercial area developed and R14 227 per unit on multi-unit developmen­ts.

Lilian Develing, of the Combined Ratepayers Associatio­n, said the study proved what ratepayers had been complainin­g about for years.

“People are moving out of Durban. In the past six weeks alone, two families from the Waterfall area have left. The belief that Durban is a cheaper city to live in is no longer true.”

Develing said ratepayers were being squeezed because there was a small rates base.

“Instead of trying to grow the rates base, the municipali­ty prefers to put more pressure on the current ratepayers, and people can no longer support themselves.”

Durban Chamber of Commerce and Industry CEO Andrew Layman said the municipali­ty had unilateral­ly instituted the developmen­t surcharge on property developers without consulting the local business sector.

“This surcharge seems to be a temporary measure by the city until its plans for ‘developmen­t charges’ are introduced. Those plans, which have caused an outcry from all quarters, will not only affect developers but ordinary homeowners and businesses,” he said.

“These charges will increase property developmen­t costs significan­tly and thwart property projects in Durban… Chamber members who are active in the property sector are already up in arms about the surcharges and we are opposed to the plan to extend this in the form of developmen­t charges,” he added.

Layman had not seen the Sapoa study, but said it was clear property developmen­t in Durban was costing more.

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