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Impact of high municipal rates & taxes

18 Jun 2014

Yearly increases in municipal rates and taxes have impacted the SA economy to the tune of 4 500 lost jobs as well as lost economic output of some R2.8 billion.

The highest increases were seen in Nelson Mandela Bay at over 11 percent, followed by Mangaung at 10.97 percent and Tshwane at 10.75 percent, reports Gopal.

These findings were announced by the South African Property Owners’ Association (Sapoa) at the 46th Sapoa International Property Convention and Exhibition held in Cape Town last week.

It comes in the wake of Sapoa earlier this year appointing specialist consultants Rates Watch (Pty) Ltd, in partnership with the University of Pretoria, to investigate municipal budgets for the coming year.

The goal was to identify key municipal budget information on property-related costs like rates and taxes, electricity and water in SA’s 11 largest municipalities. And the findings have done just that,” says Sapoa chief executive officer, Neil Gopal.

Medium-term growth in property rates in SA’s metropolitan regions has ranged from 4 percent to 11 percent a year over the past four to five years. The weighted average growth in property rates was 6.7 percent a year.

The highest increases were seen in Nelson Mandela Bay at over 11 percent, followed by Mangaung at 10.97 percent and Tshwane at 10.75 percent, reports Gopal.

He says the lowest increases were posted in eThekwini, Polokwane and Ekurhuleni at 4.3 percent, 5 percent and 5.6 percent respectively.

Similarly, the ratio of rates and taxes varies widely across the country. Although a ratio of 2:1 to 3:1 on the tariff for business and commercial properties was found when compared to residential properties, the highest ratio in the research by Rates Watch was 5:1 in Mangaung.

Of note is also the fact that the ratios are the effective ratios after taking into consideration the rebates for residential property.

“Sapoa’s key concern is to ascertain whether or not these high rates and ratios inhibit SA’s economic policies, something prohibited by the Constitution,” explains Gopal.

Perhaps the most striking observation reported is the inconsistency of property valuations, especially in the residential sector, where properties are most often under-valued.

The net result is to increase the ratio paid by commercial and industrial properties.

Effectively, owners of accurately-valued properties end up paying too much. Sapoa wants to be sure municipalities are delivering an equivalent amount of services to their commercial and industrial property sectors, says Gopal.

“Sapoa represents the voice of the commercial and industrial property sector in South Africa, with more than 1 200 members.

We see this study as the beginning of a process to engage with the Department of Cooperative Governance and Traditional Affairs (COGTA), under which the jurisdiction of the Municipal Property Rates Act vests, says Gopal.

“We look forward to constructive engagement with COGTA and its newly appointed Minister, Pravin Gordhan, on municipal rates and other issues that impedes the property sector and ultimately economic growth and jobs,” adds Gopal.

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