GENERAL VALUATION ROLL EXTENDED BY ONE YEAR

As we were gearing up to inform our clients to start taking note of current market activity to support their property's July 2021 municipal value, we received advice of an extension to the next GV date from the City of Cape Town's municipal valuations division. Having met with the City Valuer at the 'covid deserted' Civic Centre to discuss challenges the public are facing with regard to finalising their GV2018 municipal values, we tabled the timing of the next General Valuation, only to be informed that the next General Valuation (GV) will be GV (July) 2022.

South Africa's municipalities are legislated to perform a GV every four years (unless special permission for an extension is obtained) as per the Municipal Property Rates Amendment Act 29 of 2014 (MPRA) but the City of Cape Town has proudly 'published' a GV every three years since GV 2006, thereby reflecting property market changes more regularly. A property owner's rates obligation is based on their property's municipal valuation which should reflect the estimated market value of the property at the date of valuation, being 2 July 2018 (for GV2018). Having monitored the Western Cape's property market since that date, it is apparent that our region's values have generally dropped dramatically, by as much as 30% in some nodes.

Consider a Camps Bay residential property that has a municipal value of R12 000 000 in GV2018, i.e. its market value was R12 000 000 as at 2 July 2018. In today's market, this property is likely to have experienced a 25% drop in market value owing to a number of market forces, resulting in a July 2021 market value of approximately R9 000 000. Taking into account the residential rebate of R300 000 and the annual change in rating tariff, this notional property owner's rates obligations look like this:

    *2021/2022 tariff

The table above illustrates the possible difference in monthly rates obligations and how, although the basis of the rates calculation is the property's stagnant (for three years) municipal value, the rates increase in July each year, owing to the tariff increase. South Africa has experienced a dramatic decrease in overall property values however, given the delay in producing the next GV, the "benefit" of such from a municipal value point of view, will not be felt until July 2023 when the GV2022 takes effect. Although the GV2022 will apply to your property's July (historically) 2022 market value as the municipal value, the effective change (where your rates are based on the new figure) is only on 1 July 2023.

Annual increases in residential rates tariff:

This is a bitter pill to swallow for some, especially where income generated by investment properties has drastically reduced owing to downward pressure on monthly rentals. While income decreases, property-related expenses increase by above-inflation (in some instances) percentages.

Should you have any queries regarding your property's municipal value or the GV process in general, please don't hesitate to contact us either via email (pauline@steer.co.za) or at the office on 021 4261026.