Cape Town rates saga continues
Bungle prompts extension of objection deadline to end-April
CITY OF CAPE TOWN’S admission last week that municipal values of at least 70 000 sectional title units had been miscalculated due to a computer error – up to 200% more than actual market value – raised renewed concern that the city’s homeowners could be slapped by disproportionately huge increa- ses in rates accounts when the new billing system is implemented on 1 July.
City of Cape Town valuations director Chris Gavor last week tried to allay fears that the embarrassing blunder, which resulted in inflated valuations at nearly half of Cape Town’s 4 400 sectional title schemes, could be much wider spread.
Gavor says there’s no reason for Cape Town residents to panic as the 70 000 incorrect sectional title valuations amounted to less than 10% of the total 735 000 property valuations recently completed across the city. The 70 000 owners affected should all have received written corrections through the post by end-March.
But the blunder will no doubt prompt thousands of other homeowners, who may (rightly or wrongly) believe that their valuations have also been miscalculated, to lodge objections over the coming weeks. Gavor says some 5 000 valuation objections have been received since the new valuation roll was officially released on 21 February. He says this is a relatively low number, considering a total of 735 000 registered property owners have received new valuations in the past three weeks.
However, Gavor concedes that others may now “jump on the bandwagon”. To deal with the expected influx of objections, seven more venues where valuation objections can be lodged have been opened in the city, bringing the number to 19. The closing date for the objection process has also been extended to 30 April for sectional title owners (from 24 March).
Questions have been raised about the city’s ability to deal with the expected barrage of objections. But Gavor maintains the city has enough manpower to carry out re-evaluations where necessary. “We are confident the bulk of the objections will be processed and finalised before the new rates billing system is implemented on 1 July.”
However, Gavor warns that homeowners who lodge “frivolous” objections to new property valuations could end up being out of pocket as costs could be awarded against them.
City of Cape Town’s bungling of sectional title valuations follows allegations that recently completed property valuations – based on market values at 2 July 2006 – have been artificially inflated to boost the city’s municipal rates base. The last time an official valuation was carried out in Cape Town was six years ago (1 January 2000). Municipal values have, therefore, increased quite significantly since, and homeowners are concerned that rates accounts will rise accordingly when the new billing system is implemented.
But Gavor dismisses talk that municipal values in Cape Town have been raised above market value. He says official figures show that residential property values – representing 72% of Cape Town’s total property roll – increased by a factor of 3,8 (or 280%) over the six and a half years – from R125bn to R471bn. This is not much more than the average house price growth of 200% recorded by Absa nationally over the same period.
Gavor says the notion of rates increasing in line with property valuation increases is also completely flawed. “Increased values do not necessarily lead to an increase in the amount of rates paid. The city will reduce the cents in the rand payable in each category to compensate for the overall increase in values. As a result, most homeowners are likely to see their rates account increase by no more than 5% to 10% from 1 July. Some may even see a lowering of their rates burden.”
Llewellyn Louw, valuations manager at Cape Town-based property valuers and economists Rode & Associates, confirms that homeowners have no reason to expect exorbitant rates increases.
Louw says municipalities have to comply with legislation that prohibits annual budget increases in excess of 10% without special approval from Treasury. “It’s therefore logical to deduce that the increase in property valuations will be balanced by a corresponding decrease in the cents-in-the-rand rate.”
Louw says homeowners should use their rights under the new Local Government Property Rates Act to file valuation objections if they have grounds to believe their property has been overvalued.
Cape Town property owners will only be able to accurately assess their rates once the new cents-in-the-rand rate is proposed by the council at end-March when it’s expected to consider its draft budget.
Confident that the bulk of objections will be finalised by 1 July. Chris Gavor