Buyers to opt for well-run councils

27 Sep 2012

Every homeowner wants the municipal services they pay for to be provided and the area they live in to be properly managed.

Davel notes that a clean audit is a metaphor for the overall performance of a municipality, because when the financial affairs of such an entity are not managed properly, it is often the case that nothing else is either, from rubbish collection and street lighting to health services, water purification, libraries and all sorts of other facilities, as well as making provision for future repairs and improvements.

Jan Davel, managing director of the RealNet estate agency group says this is why it is disappointing to learn that only five percent of South Africa’s municipalities are currently able to achieve a clean audit report from the Auditor General. 

Davel notes that a clean audit is a metaphor for the overall performance of a municipality, because when the financial affairs of such an entity are not managed properly, it is often the case that nothing else is either, from rubbish collection and street lighting to health services, water purification, libraries and all sorts of other facilities, as well as making provision for future repairs and improvements.

Consequently, he says, the financial health and proper management of a local authority is likely to become an increasingly important consideration for South African home buyers, along with the presence of good schools and a good transport infrastructure.

In short, they will go where the service is good and the rates are fair, he says.

In fact, he says the preference for environments that are perceived as safer, cleaner and better run than many city suburbs is already evident in the relocation of many families to certain country and coastal towns while their breadwinners become weekly commuters.

“The weakness of many municipalities will also strengthen the appeal, they believe, of large security estates that are so well run by their Home Owners Associations that they are virtually independent of municipal services.”

Davel says a similar choosiness can also be expected to emerge among buy-to-let investors.

At the moment, he notes that the low activity in this sector of the market is mostly due to economic reasons, but potential investors are also worried that if the areas they buy into are badly run, they could be left holding worthless assets in a place where no-one wants to live.

“On the other hand, most of the municipalities that did get clean audits are not exactly bustling metros with a high demand for rental property.”

However, he says, if they play to their strengths now, these areas and towns will soon be attracting new businesses (which are just as concerned as homeowners with the reliable provision of services), new employees/ residents and new developments.

This will further boost their tax bases, enable them to become even more efficient and make them a great proposition for investors.

The municipalities that did manage to obtain clean audit reports recently were:

1. The West Coast District Municipality that covers the whole area from the border of the Cape Town Metropole to the border of the Northern Cape

2.The Swartland Local Municipality, one of those falling into the West Coast District Municipality and encompassing the towns of Darling, Malmesbury, Moorreesburg, Riebeek Kasteel, Riebeek West, Riverlands and Yzerfontein

3. The Umzinyathi District Municipality in KZN, which includes the towns of Dundee and Greytown as well as the Nquthu and Msinga areas

4. The eMadlangeni (Utrecht), Richmond, Umdoni and Umtshezi (Estcourt) local municipalities in KwaZulu-Natal

5. The Waterberg District Municipality which covers the area of Limpopo including Modimolle (Nystroom), Mookophong (Naboomspruit), Bela Bela (Warmbaths) and Thabazimbi

6.The tiny Fetakgomo Local Municipality in Limpopo

7. The Ehlanzeni District Municipality based in Nelspruit and the Gert Sibande District Municipality based in Secunda in Mpumalanga

8.The Steve Tshwete (Middelburg) and Victor Khanye (Delmas) local municipalities, also in Mpumalanga.

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