Cape Town valuations shock many

22 Mar 2013

After the chaos that reigned when the 2009 property valuation roll came out, it seemed as though all the significant teething problems would have been resolved, but it appears that once again the system does not work.

After the chaos that reigned when the 2009 property valuation roll came out, it seemed as though all the significant teething problems would have been resolved, but it appears that once again the system does not work.

This is according to Seeff City Bowl agents, Michael Hauser and Doris Ricketts, who say they would say that the problem is getting worse. Most estate agents are simply inundated with requests for assistance in objecting to the latest valuations.

Homeowners have until the end of April to object to their property valuations whereafter the new municipal rates will come into effect, based on what the agents describe as inflated values.

Many pensioners who have lived in their homes for decades are faced with outrageous valuation increases that will result in monthly rates bills that they cannot afford. Most of these residents live on meagre pensions and will end up losing their homes.

Many of the older homeowners are not even aware of the fact that they need to check the new valuations and lodge objections before the end of April. Hauser and Ricketts say they are likely to see shock waves across the city come early May.

There is simply no consistency in the percentage increases. In the City Bowl suburbs for example, homes in the same street are facing increases of up to 63 percent. Older homes on smaller stands are valued higher than modern homes on bigger stands. How is it possible that there can be such disparity, they ask.

“We are assisting homeowners with valuations that can only be described as ridiculously inflated and preposterous. Our colleagues in our other branches and agencies tell us that this problem is not unique to the City Bowl and they are all facing the same challenges.”

Properties have been valued at the same date of valuation, supposedly to ensure fairness, i.e. as at 1 July 2012. The city’s valuations are based on actual property transactions (sales) that have taken place in the open market around the date of valuation.

The Local Government: Municipal Property Rates Act, no 6 of 2004, states that all properties on the valuation roll must be valued at market value, defined as “the amount the property would have realised if sold on the date of valuation in the open market by a willing buyer to a willing seller”.

Based on the significant number of property valuations that they have investigated on behalf of homeowners in the City Bowl with objections, Hauser and Ricketts say, there is little evidence that the above formula was used as a basis to calculate the new values.

Rather than using what a home may have fetched on the open market at the date of valuation, it appears that the sales prices during that period was used as a guideline. The difficulty with this is that stand sizes differ as do the homes thereon. While some are new, modern and spacious with stunning views, all of which would inform the price that a willing buyer may pay for the home, many are old and un-renovated, have no gardens, views or any real attributes that could justify the proposed values.

Taking sales prices during a particular period also does not take seasonality into account. Rather, the sales of a particular year, exclusive of any anomalies (i.e. exceptionally low or high sales that are not the norm for the street or suburb), would form a better basis. While there are always the odd properties that fetch low or high prices, these are the exception, rather than the rule. Like for like should be compared.

For example, in Invermark Crescent, Higgovale, a brand new home with five bedrooms and six bathrooms on a large stand of 1 400 square metres sold for R21 million in 2010. This is an exception, not only for the street and suburb, but for the City Bowl as a whole. As a result of taking this sale into account, a 900 square metre property in the same street with a home that is in no way comparable, has seen its value now pegged at R21 million, up from R7.1 million in 2009 (adjusted after it was initially valued at R11 million in 2009).

This equates to an increase of almost more than double (195.8 percent). Taking the average sales over the period into account, the home should be valued at around R9 million, says Hauser and Ricketts.

Yet another example in the same street is an old, un-renovated home with a tiny garden and limited views on a smaller, 892 square metre stand has now been valued at R8.5 million; up by 63 percent from its 2009 valuation of R4.8 million. The home should be valued at around R6 million, say the agents.

A property in Alexandra Avenue in Oranjezicht that was valued at R4.25 million on the 2009 roll was reduced to R3.3 million. Low and behold, this year, it is valued at R4.65 million; an increase of more than 40 percent.

Taking the size of the stand and home thereon into account as well as what it could possible fetch on the open market based on the average sales prices of the period, it should be valued at R3.75 million, representing a 13.6 percent increase.

These are just two examples of many. Based on what they have seen, Hauser and Ricketts say, homeowners are facing increases upwards of 29 percent in Oranjezicht, 26.7 percent in Gardens and 21.8 percent in Tamboerskloof. This, compared to average house price growth, based on sales data for the period 2009 to 2012 of 24.8 percent in Oranjezicht, 5.6 percent in Gardens and a price drop of -9 percent in Tamboerskloof.

If the municipality had used the 2009 market value and added the average house price growth percentage (based on sales), they would have arrived at a more realistic value. Homeowners with objections that amount to more than 10 percent of the valuation are also faced with significant action and documentary evidence, say the agents.

The time and resources that this takes, surely should be of great concern, not only that of homeowners and estate agents, but more significantly that of the local municipality. This is time and money that could be better spent. 

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