Opinion Editorial – Municipal rates based on valuations

Opinion Editorial – Municipal rates based on valuations

Adrian Goslett; Regional Director & CEO RE/MAX of Southern Africa

Do you know how much your property is really worth? And do you have a good idea of the rates you should be paying on it?

Municipal rates are one of the most important of all local government taxes, and essential to the efficient functioning of your city or town, not to mention maintenance of the quality of your environment.

Every one of us who owns a property is required to pay rates, and rightly so. But because not all properties are created equal, each has to be rated separately in order to determine a realistic, market-related value – and therefore, an equitable rates amount to be levied on the owner.

The City of Cape Town is currently undertaking just such an exercise on the 780 000 rateable properties within its boundaries, pegged at a value as of 1 July 2009. But according to recent media reports, there are already problems with the preliminary values it has attached to many properties.

This is hardly surprising, given the sheer scale of the project; inevitably there will be inaccuracies and misperceptions about individual properties’ value. Indeed, the City may be in possession of outdated information relating to a property, and it has also lamented the fact that it cannot obtain daytime access to many homes because of the unavailability of owners.

But the current valuation process is also problematic because property values have, in the past 18 months, depreciated significantly. According to the latest Absa house price index, the prices of small homes declined in real terms by 6.6% year-on-year in December, medium homes by 6.9%, and large homes by 3.7%.

Granted, property values have increased nominally in the past few months, but not so much as to be significant at all. Therefore, rates valuation amounts should be substantially lower than they were in 2008 – which means that many people could ultimately end up paying lower rates than they are at present, once the new rates are imposed.

The City of Cape Town, in an effort at transparency, has made its preliminary assessments of individual property values available on its website for home-owners to inspect. It has also posted the assessments and an indicative “cents in the rand” rates amount to home-owners, to help them prepare for the rates they will have to begin paying in the second half of this year.

Capetonians have two months, as of 22 February, in which to challenge the municipal valuation of their property. After this period, says the City, objections will not be entertained. It is also making the objections process easy, with 18 rates evaluation inspection centres during the objection period, as well as a call centre.

This is fair enough: it is plentiful time in which to have one’s say about the worth of one’s property, and the City must complete its roll of valuations for implementation on the target date of 1 July 2010. While we should have the right to challenge the taxes imposed on us, the authorities should also be able to collect them efficiently and effectively.

This process is certainly laudable, and shows that there is a will on the City’s part to attain a fair and equitable rates valuation for each property. But this does not necessarily mean that this goal will be achieved on a large scale, particularly given the dip in property values in the recent past, and property owners should be wary of simply accepting the accuracy of the municipality’s assessment at face value.

My advice to home-owners is this: do your homework, and ensure that you are getting a fair deal from your council. It’s not that difficult to do: simply get a credible estate agent – or better still, a certified property valuer – to visit your home and provide you with all the correct information you need to determine a fair property value and rateable amount. Cross-check this, too, with recent property sales in your area.

Obtaining an independent, accurate and up-to-date valuation for your property may take a little sweat and cost you a few rands, and if it confirms the municipal estimate, then you have a good idea of how much your most important asset is worth, and you have peace of mind that you are not being overcharged.

But if it indicates that you have grounds to challenge the municipality’s estimate, it could save you thousands in rates payments. And that is money that you could use to even greater benefit, such as paying off your bond more quickly and saving you even more thousands in mortgage interest payments to your bank.


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