Comments On The Spatial Planning And Land Use Management Bill, 2011 Of South Africa
July 21, 2011 5 Comments
The one problem I have with the wording of the Bill relates to the whole aspect of dealing with the value of property. Investors in property, which include banks through mortgage bonds, rely on property’s inherent value. The Bill instructs that when Councils are required to make decisions, they should not allow themselves to be constrainted by the consideration that such decisions will impact negatively on the values of surrounding properties. To me that sounds like a value-eroding instruction.
The South African economy is classified as being as being developmental in nature. In so saying, it is only logical that politicians could be expected to pursue policies that further the interest of rapid development. Property development is a highly risky endeavour in which significant sums of capital and time need to be injected in one fell swoop. Once the money is in the ground, there is no going back, as opposed to say equities, wherein investors can sell their shares or even invest small sums at a time . The exit strategy of property development is rather long term in nature. Therefore, the risk of value-erosion is a variable that needs to be managed very delicately.
The benefits that arise out of the concept of value in property assets are many and varied. Firstly, the tax base of any city based on the concept of value. Municipal rates and taxes are levied using calculations which have property value as the starting point. Government agencies such as the Revenue Services generate capital gains tax on the basis of value that has accrued to property assets over the years. Before the Treasury Department can approve a Public Private Partnership project, it is guided by value accruing to Government as one of the three, perhaps the most fundamental of considerations. Banks use the value accruing in property as collateral to extend credit to consumers. Without the confidence that value in the properties on which credit is being extended, bankers would be hard pressed to approve property loans. Very few people are wealthy enough to be able to purchase property for cash. Most people buy property on the knowledge that property is guaranteed to appreciate in value over time. An entire statutory body, called the Valuation Council is in existence, precisely for the purpose of regulating the value of property. Section 25 of the Constitution of The Republic of South Africa protects the market value of property. Even under conditions of expropriation, the State is still required by the Constitution to take value into account.
The Drafters of the Spatial Planning And Land Use Management Bill, 2011 Of South Africa should perhaps review their thinking with regards to property values and reconsider.