Cape Town rates saga con­tin­ues

Bun­gle prompts ex­ten­sion of ob­jec­tion dead­line to end-April

Finweek English Edition - - Property - JOAN MULLER

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

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