Tax rewards spur Joburg CBD revival

The renewal of the country's major inner city is showing some promising results. This follows the introduction of urban renewal tax incentives by the government in 2004.

Research conducted by leading commercial property services group Broll has revealed that the urban development zone (UDZ) in Johannesburg had contributed R8 billion to the city's central business district (CBD).

The City of Joburg's UDZ covers an 18km² area, stretching from Fordsburg in the east to Jeppestown in the west and from Bellevue in the north to the M2 in the south.

Property analysts Lightstone recently completed a study comparing growth in residential property values in UDZ and non-UDZ areas for two periods, from 1993 to 2003 and from 2004 to 2010. This was done to assess what impact the incentive scheme has had on property values in these areas.

From 1993 to 2003 property prices within the Joburg UDZ were not increasing at the same rate as those immediately surrounding the UDZ and in fact showed significantly lower growth than non-UDZ properties. However, from 2004 to 2010, with the tax incentive in place, the growth in property prices for UDZ properties was higher than that of nonUDZ properties.

From 1993 to 2003, non-UDZ properties registered 217 percent price growth compared with 142 percent for suburbs that were subsequently declared development zones.

Lightstone said UDZ areas performed better than nonUDZs from 2003 to 2010, showing 92 percent growth over the period compared with 74 percent for non-UDZ areas.

Lightstone senior analyst Hayley Ivins said it was a global phenomenon that big cities with extensive investment in infrastructure were prone to urban decay, especially where increased urban migration was present.

Ivins said the inner city of Joburg had experienced this and the urban renewal tax incentive had clearly had an impact on reversing this decline.

The UDZ tax incentive is part of a national scheme to encourage inner city renewal across the country.

In terms of the scheme, any taxpaying individual or entity owning commercial, industrial and/or residential property within a UDZ may claim a tax allowance covering 100 percent of the cost of property refurbishment over a period of five years. New property developments may claim the tax allowance over 17 years.

Broll area specialist and commercial broker Keke Khojane said the Central Johannesburg Partnership, a private non-profit company working with the Johannesburg Development Agency, had been instrumental in improving the inner city by creating jobs, implementing strategic developments, campaigning for various policies and by-laws, establishing City Improvement Districts and being consultants and communicators in a number of security projects.

She added that "huge transformation" was under way in the Joburg CBD, Braamfontein and Newtown.

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