General Valuation 2006 - Increased Property Values Do Not Necessarily Mean Higher Property Rate

This week some 735 000 property owners in Cape Town will receive letters informing them of the new valuations of their properties. The letter also informs them of the process they need to follow if they wish to object to the new valuation.

The date of the new valuation is 2 July 2006, meaning that the valuation must reflect the market value of the property on that date. It is a requirement of law that Council value the properties at market value, including both land and improvements. The previous general valuation was carried out on 1 January 2000.

The total valuation of all properties in the city has increased from R195 billion in 2000 to R654 billion in 2006, i.e. it has increased by a factor of 3.4

Value increases have varied across rating categories:

The residential sector's values have increased from R125 billion to R471 billion, a factor of 3.8, and has risen from 64% to 72% of the total valuation. In the same 6.5 year period, the ABSA House Price Index increased by a factor of 2.98, indicating that there has also been a fair amount of growth in the Cape Town residential sector above the average house inflation rate.

The Commercial and Industrial Sector has increased from a valuation of R41 billion to R106 billion, a factor of 2.6, and a reduction from 21% to 16% of the total valuation.

The value of the State and Public Sector Infrastructure has increased from R10 billion to R27 billion, a factor of 2.7 and a reduction from 5% to 4% of the total valuation.

The Agriculture sector has increased from R3.4 billion to R10.4 billion, a factor of 3.1 and comprising a slight reduction from 1.7% to 1.6% of the total valuation.

Increased values do not of their own necessarily lead to an increase in the amount of rates paid. The City will reduce the cents in the rand payable in each category, to compensate for the overall increase in values. What is more relevant for an individual property owner to assess is whether their property has increased by more or less than the average increase in that category.

As an example, if a residential property increased from R200 000 in 2000 to R600 000 in 2006, its increase factor is 3, very close to the ABSA House Index inflation. As this factor is less than the average residential factor of 3.8, it will mean that this property will likely see a lowering of its rates burden, before the addition of any general increases that the Council may wish to impose to increase levels of service delivery.

Currently the Council provides a rebate of 30% to residential properties compared to commercial/industrial properties. When Council considers the implementation of rates based on the new valuation roll, it will need to consider whether to increase the residential rebate or not.

We are all aware of the particular problem of pensioners and handicapped people who are on a fixed income, whose property value may have increased more than the average, and may face undue increases in rates.

Currently, rebates on a sliding scale are available to them where their monthly income is up to R3000 per month. Council will need to consider whether there is a need to increase this upper limit on these additional rebates available to pensioners and handicapped persons.

Council will consider a draft budget at the end of March 2007, at which time the proposed cents in the rand will be made known and property owners will be able to accurately assess the rates they will pay on their new valuations.

Media Queries:
Cllr Ian Neilson
Cell: 083 306 6730