12% property rate hike: don’t panic yet

It is too early to panic about the property values in the City of Johannesburg’s new general valuation roll due to open next Wednesday, says Ben Espach, director of valuations at Rates Watch.

Espach was responding to ratepayer criticism that the increase in the total property valuations outstrips the increase in market value.

The argument is that property values were negatively impacted by the Covid pandemic as well as slow economic growth and the increase of 12% is excessive.

Espach pointed out that the valuation date of the existing roll is 1 July, 2017, and that of the new roll is 1 July, 2022. One therefore has look at value growth over the full five years before concluding that the new valuations are inaccurate.

“Residential property, especially in the lower price range, [was] not as badly affected by Covid. Retail properties like shopping centres, on the other hand, were heavily impacted, but have recovered well.”

In the industrial property sector, manufacturing was badly affected, but warehousing has been doing extremely well. “Covid did not even cause a hiccup,” said Espach.

The market for office space has seen a structural change due to Covid. Before the pandemic, working from the office was the norm. That changed and some workers will never return to the office, while some employers have a hybrid system of working from both home and the office.

“Landlords had to lower the rent they demand. As a result, the valuations must be lower,” according to Espach.

Espach advised owners to also check the categorisation of the property.

This led to a huge increase for especially independent schools last year, when they were suddenly categorised as businesses and taxed as such. A court application in this regard is still pending.

Espach said residential sectional title units may be categorised as businesses if the zoning of the property or the primary use is for business.

If so, they can lodge an objection and apply to change the category to residential before the end of July.

The third factor to determine the amount payable is the tariff, which is determined in the municipal budget process.

Rates Watch expected the tariff to be unchanged, but this will only become clear when the draft budget is published for comment at the end of March.

Finally, the rates policy may provide for relief for certain categories of owners through exemptions, rebates and rates reductions.