Overvalued properties

Geoff Jacobs, president, Cape Chamber of Commerce and Industry.

The vast majority of Cape Town business and residential property owners believe that their properties have been significantly overvalued by the City and that the present system of determining valuations is unfair.

In a survey of its membership by the Cape Chamber of Commerce and Industry, 63.2% of respondents saw the rating system as a wealth tax while only 36.8% said it was a reasonable way to raise revenue for local government.

What surprised us most was the number of properties which our respondents said were overvalued by 100% or more. One would expect variations of perhaps 20%, but when the 100% figures appear then it is clear that something is very wrong.

Nearly 61% of respondents said their business properties were overvalued while 73% said their residential properties were overvalued.

In response to the question, “Leaving sentiment aside, if you were offered the equivalent of municipal valuation for your property would you accept or reject the offer?”, 57% said they would accept the offer and sell their properties.

This is a very significant comment as it reveals the real extent of dissatisfaction with the valuations and that people have no confidence in the system. This is confirmed when more than 82% of respondents say they do not believe the computerised mass appraisal system of valuation is fair.

The main problem is that suburbs in Cape Town are so different that it is difficult to understand how one computerised system can be fair to all. In addition, commuting problems, congestion and local nuisance problems like noise from busy roads or danger to pedestrians can affect values.

Other comments received were that the City’s operating costs are too high and that this is the reason that valuations are so high and that the City should use a zero-based budgeting system.

Several respondents say rates should be based on the actual purchase price of the property increased every year by the inflation rate. This would eliminate the unfair way in which those who improve their properties (and their neighbourhoods) are “punished” with higher rates accounts.

Properties where valuations increased by more than 15% should be individually valued.