TIME FOR HOME TRUTHS
The deadline is fast approaching for Johannesburg property owners to appeal against valuations and possibly save themselves a packet in higher rates
While the City of Johannesburg has agreed to revalue 8,000 properties — mostly commercial buildings and blocks of flats — any property owner who believes their valuations are overinflated can lodge an objection. But they should act fast.
Johannesburg’s municipal valuation roll, which covers all properties that fall into the city’s taxation net, has to be reviewed every four to five years under the Municipal Property Rates Act. The latest valuation roll was released for public scrutiny on February 20. Residents have only three weeks until the deadline for objections expires on April 6.
Figures released by the city show that valuation increases have averaged 30%-40% over the past five years, which is in line with the 29.7% average increase recorded by FNB’S house price index for SA as a whole over that period. However, the city concedes that the valuations of close to 6% of properties have increased by more than 80%.
While everyone accepts that market values have risen over the five years, there is a perception that values have been artificially inflated to boost the city’s municipal rates base. The concern is that thousands of property owners could be slapped with disproportionately large rate increases when the new valuation roll is implemented on July 1.
Johannesburg mayor Herman Mashaba has denied that property valuations were unduly increased to line the city’s coffers. “Nothing could be further from the truth. This process is run independently from the city, and cannot be influenced by the city,” he said in a statement. But the mayor admitted errors had been made and that 8,000 properties would be issued with section 78 notices revising their values.
In an interview with the Financial Mail, Gauteng premier David Makhura says residents had asked him to intervene. “We have never had a situation where there was such an extraordinary outcry as with the 2018 valuation roll.”
Makhura is concerned that the mistaken valuations acknowledged by the city might be “the tip of the iceberg”. “The intervention [by the city] has focused on a sample of only 1% of more than 800,000 registered properties in Johannesburg,” he says.
Chas Everitt International Property Group is offering free independent valuations for all owners who need supporting documentation to substantiate an objection.
Company CEO Berry Everitt says municipal valuations should be market related. “This means it should be close to what a willing buyer is prepared to pay.” Everitt says incorrect municipal valuations will not only result in an additional rates burden, but can also affect a property’s resale prospects.
Both residential and commercial properties will be affected by higher valuations, but different tariffs are used to calculate the monthly rates bills for the two categories, says Ben Espach, a professional valuer and director of Rates Watch.
He says rates are levied as a cents-inthe-rand tariff based on a percentage of the total market value of the property (land plus buildings). Different municipalities have different cents-in-the-rand tariffs.
Johannesburg residential owners pay about 0.73c in the rand, while commercial property owners pay about 1.9c in the rand. Espach says only residential property owners qualify for a rebate on the first R200,000 of their market value (see table).
What it means:
Clearly, commercial property owners will be hardest hit by any excessive increase in valuations, which has prompted the SA Property Owners Association (Sapoa) to add its voice to the protests. Sapoa CEO Neil Gopal says while the association acknowledges that rates are necessary to fund service delivery, they must be levied in a just and equitable way.
Gopal says undervaluation of properties is as problematic as overvaluation because both cause rates imparity. “We are concerned about the valuation processes. One major problem is that valuations are being conducted by inexperienced assessors.”
Johannesburg property owners could face a double whammy if the city also increases the cents-in-the rand tariff in its draft budget next month. It seems unlikely though that the city will risk further antagonising ratepayers.
The city may even decide to lower the cents-in-the-rand tariff to compensate for the overall increase in values. It is, after all, only a year before political parties head to the polls.