Whatshot
Vacant land and the real value
Vacant land and the real value
Date: 2025-03-27
As a property professional and close to all aspects of the real estate market in South Africa, I often ask hard questions and try to find reasonable answers. What has become increasingly apparent is the difficulty over the past three to five years in selling vacant land in certain estates and areas.
In some municipal areas such as eThekwini, the dramatic and sudden exponential increase in rates payable on vacant land within the Metro had a direct and immediate impact on many property owners of vacant land. Their values dropped, as the market would not accept the pricing and the high monthly rates liability associated with owning the land.
Large-scale developers of vacant land had to try their best to negotiate temporary relief while they prepared the land for sale and transfer. The new owners however were faced with large municipal rates liabilities going forward. Demand for vacant land evaporates in the face of unacceptably high rates. The Laffer Curve is a beautiful theoretical economic model that shows that as tax rates increase on any good or service it reaches a peak in revenue after which tax revenue decreases as tax rates increase beyond an acceptable threshold.
In some instances, while there are existing large-scale developments in progress that cannot be reversed, tax revenue may increase for a short while as these new sites are transferred. Still, the new capital will depart from that area and seek returns in more favourable jurisdictions. Hopefully, high tax rates on vacant land in eThekwini will be amended in the future.
In areas such as Kwadukuza, where rates on vacant land have only increased annually by lower more reasonable levels, certain areas such as Zimbali and Simbithi as the historical powerhouses of growth have had their historical run on vacant land with pricing in each estate growing rapidly for a period, then reaching a plato for a period and then declining for a period.
Zimbali has gone through this cycle with declining vacant land pricing and anybody active in this market would have witnessed this firsthand. Smaller estates such as Port Zimbali Estate, Hilltop Estate, and Lazuli Estate are lumped together with Zimbali.
New emerging estates such as Zimbali Lakes Resort have battled this downward pressure on vacant land and to some extent managed to generate sales with the promise of a new cutting-edge lifestyle environment self-sufficient in terms of electricity and water, modern architecture and a flagship branded golf course.
Other new estates such as Zululami and Seaton have bucked the trend with enormous success of vacant land sales by showing completed amenities and infrastructure rather than promising these, and have gained the confidence of both end-users and investor buyers.
Simbithi is now in its vacant land cycle where Zimbali was five to ten years ago. Pricing has run too far ahead and the pullback is inevitable. Sellers of vacant land will eventually be disciplined by the market if they get to a point of sale as they realize the demand is no longer the same.
The significant increase in building costs over the past four years has increased the gap between the cost of new versus existing making potential buyers elect to secure an older home and renovate rather than build new on vacant land. The remaining prime sites in Simbithi will be the least impacted but the typical average site will feel the downward pressure in market pricing.

