Rezoning your property in 2023 | An opportunity for growth?

Many South African property owners find themselves questioning how they can make the most of their assets. One strategy that is emerging as a viable option for a diverse set of property owners is the idea of rezoning. This involves changing the designated use of a property as defined by local ordinances from one category (in this case, residential) to another, such as commercial, mixed-use, or agricultural.

READ: Tap into your property's zoning value

Why might you consider this move? Paul Stevens, CEO of Just Property, delves into the reasons.

Diversification Amidst Market Uncertainty

Like many across the globe, SA's property market is currently facing a period of uncertainty due to the ongoing impact of global geopolitical shifts and the aftermath of the pandemic. Although traditionally a stable investment, residential property can be subject to market fluctuations.

"Rezoning can allow property owners to diversify their portfolio, mitigating risk, and potentially achieving a more stable return on investment," says Stevens.

"With many areas in traditionally single-erf suburbs earmarked for higher density the opportunity exists to improve a property's value to developers," says Stevens. "Similarly, getting a large property cleared for subdivision can also make it more attractive to buyers and developers. Generally, we find a seller in this position can stand their ground on pricing (should it be a market-related selling price)."

Capitalising on Urbanisation and Commercial Growth

Urbanisation is driving demand for commercial and mixed-use properties in SAs major cities like Johannesburg, Cape Town, and Durban. "If a property is in the structure plan to be rezoned for business purposes, generally this does add value," Stevens confirms.

Rezoning a residential property on the edge of, or in, a business node to commercial can present opportunities for business operations, rental income from businesses, or even selling the property at a higher price due to its increased utility and demand, he adds.

Answering the Call for Affordable Housing and Social Services

In many of SAs urban and peri-urban areas, there is a pressing need for affordable housing and social services. Rezoning to multi-unit residential or community services could provide a socially conscious and economically viable solution to this problem. Property owners can potentially benefit from government incentives intended to encourage such developments.

The Rise of the Remote Work Culture

The global shift towards remote work has led to an increased demand for co-working spaces and home offices. Rezoning a residential property to mixed-use could allow a portion of the property to be utilised for commercial purposes, thus meeting this new demand.

Agricultural Revival and Sustainable Living

 The push for sustainability and food security has led to a renewed interest in small-scale farming, particularly in peri-urban and rural areas. Rezoning a property for agricultural use could prove beneficial in this regard, tapping into a market that's likely to grow in the coming years.

What's involved in rezoning your property?

 "Changing your zoning classification can be a long, complex process which can take up to two years, or even more in some cases. The process incurs expenses, including advertising and documentation costs, professional service charges, application fees, and the transportation development levy to be paid to the municipality," warns Stevens.

"It is possible to take on the rezoning process yourself but be prepared for a tedious process. Commercial brokers and residential property practitioners can provide advice and liaise with town-planning consultants and the Council, but drawing on the expertise of seasoned lawyers, architects, or town planners is recommended. "

According to Stevens, the initial stage involves contacting the town-planning department of your local municipality to ascertain whether your property is situated in a zone designated for high-density development or falls into a business zone. If not, it will be necessary to file for a zoning deviation.

The property owner or their consulting professional should submit a proposal explaining the necessity for changing the property's zoning. It's advisable to highlight the positive impact this change could bring to the area (such as the benefits of the proposed new use) and its possible benefits for others.

"You'll need to engage with the public and announce your plans in local newspapers (and the provisional Gazette), giving sufficient time for potential objections to be made," Stevens notes.

If you receive approval from Town Planning, the application is then forwarded to the City Council for consideration. "Be aware that you may well receive objections from your neighbours and the broader community - it is also possible that Council will not approve your application. So do not proceed with any development until you've ticked all your boxes," Stevens warns.

Is it worth it?

"Buyers prefer to purchase property that is already rezoned. As you can see from the above, it is a lengthy, sometimes frustrating process. And for that reason, they are prepared to pay more for a property that has already been rezoned or had its application approved.

"Property owners who are prepared to go through the pain themselves, can make a significant profit on their original purchase price," says Stevens. "Rezoning could present a strategic opportunity in the face of SAs evolving property market landscape."

READ: Check the zoning rights before buying a home for business use

Understanding zoning laws

As previously stated in this article published on Property24, "Know before your buy! A practical guide to understanding zoning laws", Grahame Diedericks, Manager Principal of Lew Geffen Sotheby's International Realty in Midrand said, where development has been the order of the day in recent years, to most people's minds, residential zoning is simply a choice between sectional title and freehold and, until a few years ago, it wasn't necessary know any more detail.

"But nowadays it quite literally pays to be aware of - and understand - the applications and regulations of the sub-categories."

Residential Zoning

Residential 1: This density stipulation allows for only one dwelling per erf - a house with a permitted coverage of 40% of the total erf size, including outbuildings and garages. Regardless of whether it is a single or double-storey home, the 40% footprint applies.

Residential 2: This category allows for a density of between 10 and 20 dwellings per 10 000msqm and it is, therefore, the preferred zoning for cluster or townhouse developments.

Residential 3: Allows for a density of between 21 and 40 dwellings per 10 000sqm which is ideal for secure estates and larger cluster complexes.

Residential 4: This zoning permits a density of between 41 and 120 dwellings per 10 000msqm and therefore is most commonly applied for when constructing blocks of flats.

The growing prevalence of mixed-use areas in Johannesburg has elevated the significance of zoning in the commercial sector and properties with business rights in these areas highly sought after.

However, Diedericks cautions that the zoning stipulations must be strictly adhered to by developers, landlords and business owners in order to co-exist harmoniously with the residential component in these suburbs.

"And if you are considering purchasing land or property for business purposes that will require rezoning it's a good idea to check the perimeter of the area to determine where the business district meets the residential neighbourhood."

Business/Commercial Zoning

Business 1: This zoning applies to general business, particularly retail, in the form of shopping centres or malls. This category is largely unrestricted in terms of what type of shops the developer accepts as tenants.

Business 2: This also pertains to shopping centres, but with certain restrictions which usually apply to the property's immediate surroundings. For instance, a restriction may be placed on opening a bottle store if the centre is adjacent to a school or popular child-friendly venues.

Business 3: A stricter zoning which will not allow a wider variety of businesses to open and operate in the centre.

Business 4: This zoning provides for office use (with or without residential use) and is typified by the growing number of office parks that one sees in South African urban centres today.

The availability of parking may affect the type of commercial zoning that is permitted and there can also be rules regarding the proximity of certain types of businesses to others.

Industrial Zoning

Unlike residential and business or commercial zoning, for industrial zoning, a 70% coverage is typically allowed

 1: This provides zoning for standard factories, warehouses or storage depots.

 2: This zoning is specifically for operations that can involve noxious and/or unpleasant odours and emissions, such as abattoirs, foundries or glue works.

 3: This zoning provides for specific applications such as specialist workshops or mini-factories

"Although the stipulations are strictly regulated, it is also possible to combine zoning designations to form a combination-use zone that is unique to needs the community or project at hand, however, it is always advisable to consult a town planner to avoid lengthy and costly delays, says Odendaal

"Yes, you will save on this fee by doing it yourself but the advantages of your application being submitted by a specialist who is familiar with all aspects and potential pitfalls of the lengthy procedure as well as all the relevant departments and officials is immeasurable."

https://www.property24.com/articles/rezoning-your-property-in-2023-an-opportunity-for-growth/31818