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LEM621S - LAND ECONOMICS - 1ST OPP - NOV 2022 |
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n Am I BI A u n IVER s I TY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF ENGINEERING AND THE BUILT ENVIRONMENT
DEPARTMENT OF LAND AND SPATIAL SCIENCES
(LAND AND PROPERTY SECTION}
QUALIFICATION(S): BACHELOR OF PROPERTYSTUDIES
DIPLOMA IN PROPERTYSTUDIES
BACHELOR OF LAND ADMINISTRATION
QUALIFICATION(S) CODE: 08BPRS
06DPRS
NQF LEVEL: 6
07BLAM
COURSE CODE: LEM621S
COURSE NAME: LAND ECONOMICS
EXAMS SESSION: NOVEMBER 2022
PAPER:
THEORY
DURATION:
3 HOURS
MARKS:
100
EXAMINER(S)
FIRST OPPORTUNITY EXAMINATION PAPER
UAURIKA KAHIREKE
MODERATOR: SAMUEL ATO K. HAYFORD
INSTRUCTIONS
1. Read the entire question paper before answering the Questions.
2. Please write clearly and legibly!
3. The question paper contains a total of 6 questions.
4. You must answer ALL QUESTIONS.
5. Make sure your Student Number is on the EXAMINATION BOOK(S}.
PERMISSIBLE MATERIALS
1. Non-programmable Scientific Calculator
THIS QUESTION PAPER CONSISTS OF 6 PAGES (Including this front page}
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t:.and Economics
Question 1
LEM621S
For each of the following statements indicate whether it is 'TRUE' or 'FALSE'. Each correct answer
carries 1 mark.
(20)
a) Property tax satisfies the principle of equity because as a progressive tax system, the rate of
tax rises with increasing rateable values of property.
b) In situations where the law fixes the rate of property tax in primary legislation, the tax
revenues will vary according to changes in market values and regular revaluations.
c) Given any urban use of land (i.e., Residential, industrial or commercial), operations carried
out within their areas of highest and best use are profitable, but not as profitable as those
carried out within their zones of transference.
d) Land use capacity measures the productive potential of a given parcel of land utilized for a
given use at a given time with a specified technological and production conditions.
e) According to Von Thunen's Theory of Least-cost location activities located beyond the no-
rent margin can be profitable only when the gains in reduction in labour and management
costs more than compensate transportation cost (loss).
f) Bid rent theory assumes that in a free market the highest bidder will obtain the use of the
land. It stands to reason that the highest bidder is likely to be the one who can obtain the
maximum profit per square metre from the site and so can pay the highest rent.
g) Profit-making land uses are those uses that produce satisfaction (utility) to the users of land
whilst non-profit making land uses are those that give only monetary benefits to the users of
land.
h) The concept of use capacity is used in land economics to give an indication of relative
abilities of a single parcel to provide net returns or other satisfactions.
First Opportunity Examination Question Paper Page 2 of 6
November 2022
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land Economics
LEM621S
i) Anticipated flows of land rent provide a guide for the decisions operators make concerning
prospective investments in new or existing land resource development.
j) The taxability of a property owner in term of property tax is determined by the product of
the tax base and the tax rate expressed as a percentage of the tax base as the case may be.
k) The base for (especially residential) property tax is typically calculated using an estimate of
the market value of the property. The determination of this assessment ratio is typically at
the discretion of the taxing authority.
I) The success of the primary task of using the cost approach to estimate the market value of
all taxable properties requires data on a substantial number of recent sales of comparable
properties.
m) The income capitalization approach for estimating the rental value of taxable property
requires information on income and operating expenses for the property. The gross income
stream is generated by the property is discounted at an appropriate rate to determine the
property's value.
n) The property tax rate adopted annually by a taxing authority is typically set by the central
government.
o) Property taxes are normally accompanied by tax limitations. This may take the form of
limitation by the central government on percentage of rates.
p) Rental value assessment seems likely to lead to inaccurate estimates of property values with
a high tendency towards underestimation by property owners.
q) Landlords usually make rental concessions during periods when the supply of tenants is low.
This occurs during and when an economy experiences rapid growth.
r) A method of assessment that requires property owners to tax themselves without a credible
verification process will obviously boast the size of the tax base.
First Opportunity Examination Question Paper Page 3 of 6
November 2022
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!:.and Economics
LEM621S
s) Land by itself has little economic value until it is used in conjunction with inputs of capital,
labour and management.
t) Property as a medium of investment differs considerably in its qualities and characteristics
compared with other forms of investment.
[20]
Question 2
a) Define land economics from a legal perspective?
(2)
b) Are markets for land economically efficient? How can governments assist with the
achievement of market efficiency?
(5)
c) What is the role of institutions in the allocation of land resources? Explain in the context of
economic allocation of land resource to different users.
(4)
d) Discus the significance of land as:
i) A consumption good;
(3)
ii) Situation; and
(3)
iii) Property
(3)
[20]
First Opportunity Examination Question Paper Page 4 of 6
November 2022
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Land Economics
Question 3
LEM621S
a) Given the following information from the City of Windhoek 2017 Budget proposal, determine
the property tax rate to be adopted in the 2017/18 financial year for the purpose of
calculating and levying of property tax.
(5)
SUMMARY OF TAXABLE ASSESSMENT BASE FOR THE CITY OF WINDHOEK FOR THE 2017
PROPOSED BUDGET
LAND VALUES
TYPES OF PROPERTIES
(N$)
IMPROVEMENT VALUES (N$)
Residential properties
334,961,400
1,913,206,000
Industrial properties
299,689,000
2,633,890,000
Commercial properties
1,244,890,000
2,598,601,000
AMOUNTS IN
MUNICIPAL EXPENDITURE REQUIREMENT
N$
Extension of water supply
400,000,000
Upgrade of the central sewage system
60,000,000
General Waste collection
9,800,000
Acquisition of new Ambulance for the Otjomuise Fire Station
41,300,000
Construction of District hospital in Okuryangava
25,000,000
Construction of Primary Health Care Centres in Havana and 7 De Laan
13,800,000
AMOUNTS IN
NON-PROPERTY TAX REVENUE SOURCES
N$
Donations (Partnerships)
30,000,000
Interest on Current Investment
10,000,000
Grants from central government
60,000,000
Abattoir charges
44,000,000
Registration fees for local Taxi cabs and commuter buses
20,000,000
Trade license fees
42,000,000
b) Discuss in detail the five (5) main advantages of municipal property tax.
(15)
[20]
First Opportunity Examination Question Paper Page 5 of 6
November 2022
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1,and Economics
Question 4
LEM621S
a) Supply of land for specific uses is comparatively static in the short term i.e., it takes some
time to react to changes in demand. Fully outline on the reasons for the above.
(6)
b) Outline why it is important for local authorities to introduce property tax?
(7)
c) Inflation is termed as a one of the influential demand factors in an urban land market. Fully
account how property investment becomes attractive during an increasing inflation
environment?
(4)
d) Von Thunen's and Ricardo Theories of Least-cost location and fertility attributed the
formation of land rent over a piece of land to various factors. Outline the factors responsible
for land rent formation.
(3)
[20]
Question 5
The table below illustrates rental market data evidence for industrial properties in the Southern
Industrial Area of Windhoek. With these market evidence value Unit 5 for land tax purpose
assuming the following:
Assumptions:
• rate of return of 8%, repairs of 10%, insurance to be taken at 5% and a yard rate of
N$Sm
120
2
105
3
105
4
125
5
120
30
250
NS"12,000
0"1/10/2014
25
180
NS,0.000
15/04.l2013
20
170
Nrs·11.soo
13/05/2015
25
180
NS15.500
01/02/2015
28
250
End of Examination
"10 yr FRI lease
Tenant
pai-d
NS10,000
for
heating
si,·stem
FRI
FRI
Landlo,·d
for repairs
insurance
Occup,ed
o-\\.vne,-
development
pays
&
by
o,f
[20]
First Opportunity Examination Question Paper Page 6 of 6
November 2022