The property boom has caused an oversupply of upmarket Cape homes for rent, yet there is a shortage of stock in the lower price range.

Rental agents say that the market has changed over the past year, because tenants who could afford to buy their own homes have now done so, which has resulted in the biggest demand for rentals now being in the R3,000 to R5,000 a month range. In addition to downward pressure on rentals in the upper end of the market, owners are having to cope with a poorly implemented change to the Stamp Duty Act, which has doubled the stamp duty on rental agreements.

Beverley de Jager of Rawson Property Group, who operates between Wynberg and Cape Town says: "We are not getting the 10% annual increases year-on-year because rentals have to relate to tenants' income."

She says more stringent credit checks have to be carried out because about 60% of applicants are not realistic when calculating the affordability of deposits, monthly payments, rates and taxes and stamp duties.

Chas Everitt agent Nadine Smith says that in the Fish Hoek and Constantia areas there is an undersupply of three- to four-bedroom homes for rental around the R6,000 a month mark.

However, there is plenty of stock available in the R9,000 to R20,000 range, which is where the increase in the stamp duty will have the greatest negative effect.

Prior to January 1, stamp duty on a R10,000 Cape Town southern suburb monthly rental was R300.

This has now doubled to R600 for six-month or one-year leases.

The amendments to the Stamp Duty Act were promulgated on January 24 and gazetted under number 27,188, yet the effective date is January 1.

This is the cause for discontent among lessors and agents, who say it will be extremely difficult to recover stamp duties from lessees who signed leases between January 1 and 24.

Cheryl Rodney, South African Revenue Services (SARS) team leader for non-core taxes in Cape Town, says that the reason for the amendment is "mainly to bring stamp duties in line with other duties such as transfer duties on property sales".

In the words of the Commissioner of Revenue's official explanatory memo: "Transfer duty applies when real property rights are transferred and stamp duty applies when real property rights are leased. The long-term lease of real property was taxed at vastly lower rates than the transfer of real property.

"The proposed amendment seeks to close this arbitrage opportunity in respect of long-term leases. Accordingly, stamp duty will not be limited to the full selling value where the value of the rentals for the period of the lease exceeds the full selling value."

Though controversial, the memo contains some good news.

One positive change is intended to assist lower income groups by exempting the payment of stamp duty on lease agreements where the duty and interest combined do not exceed R200.

In addition, whereas VAT was included in the past when calculating the total amount on which stamp duty was payable, unless the lease agreement provided separately for VAT, in future VAT will be excluded in all cases.

The amendment to the act states that if a taxpayer presents a document to SARS for stamping, only the interest must be levied.

If SARS discovers an unstamped document, for example during a field audit, the 10% penalty and interest must be levied.

If evasion of the duty is evident, the case must go before the penalty committee for the imposition of additional duty of up to 200%.

In such cases penalty and interest are also payable.

Business Day