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Rent control

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Not applicable
In Port Elizabeth many are finding it hard to pay rent and I often see people loading up on a bakkie to move. There are also many commercial buildings standing empty with businesses having moved out. Would it not stimulate the economy to have government implement rent control? Various countries do have rent control, with some strict applications. If people have to move abode it is disruptive, taking time and money and possibly placing them far from their place of work and increasing transport costs. I got this information that follows from http://www.globalpropertyguide.com/investment-analysis/The-pros-and-cons-of-rent-control Maximum rent systems Sometimes the authorities determine the maximum rent, and apply it equally to new and old tenancies. Often, the maximum allowable rent is a certain percentage of the property value (enforced in India, Taiwan, Luxembourg, Jamaica, Dominican Republic, Syria, and Costa Rica). The property valuation is typically based on historical cost and not on the current property value, so that real rental returns fall over time. Rent control in Sweden is an interesting example.Rents are set far below reasonable returns-on-investment. A European University Institute (EUI) study calculates that: To make a 5% return on investment, a Swedish developer would need to set rents 70% higher than allowed by the Rent Tribunal. Rents in all dwellings must match rents for alternative, comparable dwellings, based on size and `attractiveness', primarily rents in low-rent municipal houses,
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24 REPLIES 24
AJT
Super Contributor
would that not kill the property market...
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Not applicable
In Port Elizabeth there are many buildings standing empty - see Cape road. Perhaps if rent were cheaper the owners would get at least something
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AJT
Super Contributor
but is it not better to leave that decision to the owner, rather than being prescribed by legislation...
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koos2
Super Contributor
So, if I understand correctly, the goal is to create another layer of bureaucracy and control over the investor and bloat the civil service? Plus, Your Renter defaults on a rent controlled asset And you have to give him 2 years of rent free accommodation before you can legally get him out of your illiquid asset? Nah, to rich for me thanks
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prancing_horse
Super Contributor
Let the market regulate, just as it does on the stock market. Nothing is fairer than supply and demand.The problem in free market arises when a monopoly creeps in, otherwise supply and demand cannot be beaten for price setting.
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john_1
Super Contributor
Agreed..Prancing Horse, When you next come to Cape Town please be sure to let me know, I would love to have that lunch in the wine lands I spoke of, even if we have to take my car to get there. John
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Shard
Super Contributor
Free Market is inefficient
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Wizard
Super Contributor
Socialist systems even less!
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Shard
Super Contributor
Dont want to spark a political debate, but socialist systems given the correct environment can function very well, never going to happen in this country though...
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AJT
Super Contributor
An economics professor at a local college made the statement that he had never failed a single student before but had once failed an entire class. That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said, "OK, we will have an experiment in this class on socialism. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. After the first test, the grades were averaged and everyone got a B The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F. The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else. All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed. It could not be any simpler than that.
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Wizard
Super Contributor
When the FED bailed out the banks in 08' it was an act of socialism. That seem to be working as otherwise a great void could have been established. It was an ones off act.to save the collapse of the banking system from the capitalistic greediness that got it down there. HOWEVER ...it should only be used in cases of emergency. Job done the miners are out.time to seal the rescue shaft!
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koos2
Super Contributor
What about QE2? Currency wars and the american "No pain , no pain" motto?
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PaulC
Super Contributor
Price conrols lead to shortages. Subsidies lead to surpluss and missallocation of captial. EVERY TIME. ALWAYS. NO EXCEPTION. Anyone who has read any kind of economic history will realise this. You freeze rents and you remove the incentive to "buy to let" you'll have people wanting to dump property. This leads to reduced prices which is great for buyers. But who wants to buy when they cant do with their asset what they choose. And what when rents no longer cover the upkeep / levies / rates of the property. If the free market is left alone eventually the supply of available rentals will drive down average rental prices. It may not be fast but its more efficent than legislation that will be stuck thre forever and NOT change and adapt with the current market conditions. The law of unintended consequences will come in here and it will end badly.
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Shard
Super Contributor
This is an example of full blown Communism...
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john_1
Super Contributor
I would like to sugest Capitalisum works not because hard work = success. it works because we understand that unless we get off our behinds, we going to end up in the gutter. Socialisum does not work for the same reasons. We humans respond much better to threat then to oppertunity. It is just hard wired into our brains..after all if its to good to be true then it must be..etc etc
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Not applicable
bit of a convoluted view of socialism (to put it mildly - wildly inaccurate would be a better word)
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Not applicable
Eddie, have you ever considered that PE has no real underlying sustainable local economy & that without salaries & wages you have no consumers. No consumers = no shopping = no shops or factories & that is why the buildings are empty. Instituting rent controls will b ere-attempting the homelands system by "incentivising" mobile investment in an area that only is competitive because of an artificial stimulus. When the stimulus is removed, the investment goes POOF!!! aka Zewlitsha in the Ciskei, Thoyandou in Venda etc etc. Fix the rural economy with sustainable investments in energy & agriculture & you will see PE et al booming again.
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SimonPB
Valued Contributor
now that is brave .. comparing PE to Zewlitsha and Thoyandou .. you about to be flamed by the PE boys and girls ..
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Not applicable
Again Simon my convoluted argument eludes you :) - I was comparing the false stimulus investment in PE to that of the failed Homeland Policy with fine examples to be found in Zwelitsha & Thoyandou. Altho' having said that... you been to PE lately? A short drive to ADDO via Motherwell on a Sat am will open yr eyes, as will a low flight over Uitenhage towards PE - makes for interesting thinking. What will all those folks do when the home fires have nothing to cook?
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