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Capetonians beware: Rates increase approaching!

The City of Cape Town (CoCT) has announced that the outcome of its 2018 General Valuation Roll (GV2018) will be published on 21 February 2019 for public inspection before becoming effective on 1 July 2019.

Get more information about GV2018 and how to object.

What does this mean for property owners?

GV2018 is compiled by municipal valuers and is largely based on property sales statistics as well as other data collected by CoCT contractors during 2018.

Most homeowners will not have encountered the city’s data collectors as it is simply not feasible to analyse and compare each and every property individually. Instead, the valuation team analyses recent sales of comparable properties which is then valued by means of computer-assisted mass appraisal (CAMA).

The properties are compared by erf size, number of bedrooms, number of bathrooms and quality class. Needless to say, this automated mass valuation method cannot take into account factors that require a keen (human) eye, such as state of repair, specific design, etc. This often leaves the accuracy of such valuations in doubt.

City of Johannesburg GV2018

The City of Johannesburg’s recent general valuation roll – released in February 2018 - also employed the CAMA method and left property owners up in arms. Some property owners were faced with rates increases of up to 500%!

The City admitted that errors had been made and ratepayers are still lining up to contest their municipal valuations - this is also evident from the large number of requests which Mirfin received to assist property owners. Consequently, the City of Johannesburg’s has ordered numerous properties to be revalued.

Not only does property rates and taxes affect the property owner’s cash flow but can also have a significant impact on the property value if the owner is planning to sell. For this reason, the onus is on property owners to verify that their valuations are accurate and to follow due process when raising any concerns with the City.

Verification of property value

In seeking the most cost-effective way to verify the value of their property, many owners turn to an estate agent to provide a free valuation. However, unless the appointed agent is a qualified professional valuer, it is likely that they will employ the same assessment method used by the municipal valuers, i.e. by comparing recent sales in the area.

A comprehensive assessment – convincing enough to challenge the municipal valuation – should make allowance for all factors required for a professional valuation. This applies especially to owners of income-generating properties. Property owners will need a well-motivated valuation to support your objection lodged against the municipal valuation.

Naturally, the cost of a professional valuation will need to carefully consider the cost compared to the potential benefit. Ultimately, it may amount to weighing up a low 4-figure fee against a potential 6-figure loss in the sale price or business profit due to overinflated rates and taxes.

Keep in mind that property owners who objected to their property valuations will continue to pay their old rates until the objection process is finalised.

 

UPDATE: The City of Cape Town General Valuation Roll 2018 is now available!

Get a free quote for a valuation to assist you in contesting a municipal valuation.

Read: How to object to your municipal property valuation