Property Rates and Utilities Tariff Hikes: What it Means for Property Owners and Tenants
Property rates and utility tariffs are rising faster than general price inflation rates, and this is becoming a major challenge for tenants and property owners. In recent years, property income growth has come under pressure due to long-term economic stagnation, making operating costs more of an issue than in the stronger years. This has led to a decline in real rentals achieved and a significant fall in average capital value/square metre.
Key Points:
- Property rates and utility tariff hikes matter more now than a decade or more ago, due to the slower economy and property rental market.
- Property income growth has come under pressure.
- Tenant population has become more financially constrained.
- In most instances the lease affords the landlord the right to pass any increase in rates onto their respective tenants, however this causes an affordability ripple effect as the gross rental becomes less affordable for tenants as their lease term increases.
- More downward pressure on net operating income and capital values is likely to come from these key operating cost sources of pressure.
- An increasing number of companies may search for a “better rates, tariffs and services deal” due to rising costs.
In a weak economic and property rental market environment, rates and tariffs really start to matter more to both landlords and tenants. It is not just about the level of rates and tariffs, but also about the quality of municipal and utilities’ service received in return. In the near term, it is difficult to see above-inflation municipal rates and utilities tariffs ending, which will put more pressure on property owners and tenants.
If you are a property owner, it is important to ensure that you are paying the correct amount of rates and tariffs. Swindon Property’s professional valuer can assist you with rates objections to help you save on your property rates. Contact us today to find out more.
info@swindon.co.za
021 422 0778