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The Impact of Property Value on Rates and Taxes

06 March 2018


Municipalities across the country have valued properties within its borders, in accordance with the Municipal Property Rates Act 6 of 2004.

 

What is the Municipal Property Rates Act?

In terms of the Act, all local municipalities are obliged to value and rate immovable properties (land and buildings), within their jurisdiction. The Act was implement on 1 July 2008 in order to:

  • Provide local government with access to a sufficient source of revenue;
  • Ensure long-term sustainability;
  • Enhance the developmental agenda of the municipality;
  • Address the imbalances caused by unfair past policies;
  • Provide for a fairer and more equitable valuation of properties in accordance to their respective true market values.

 

Municipal property rates... what are they used for?

Municipal property rates are the financial liabilities that owners of immovable property have to pay, based upon the value of their properties, to their local municipality. It is a reasonably reliable source of income for the municipalities which they use to provide basic services and perform their functions, i.e. roads, sidewalks, lightning, storm drainage, clinics, parks, schools, cemeteries, fire fighting, environmental protection, municipal administration funding, and so on. Water, electricity, sewage, and refuse are charged separately. Revenue from property rates is used to fund services that benefit the community as a whole.

 

How were property values obtained by the local municipality?

In the past, (before July 2008) there were different ways in which rates were calculated. In some areas rate were not even charged at all, but since the adoption of the Municipal Property Rates Act, all town councils had to apply a uniform system of rating.


The law required municipalities to appoint a municipal valuer and to compile a valuation roll with the services of professional valuers (registered in terms of the Property Valuers Profession Act, 2000). Data collectors, appointed by the valuers, assisted in data collection in order for market related valuations to be determined.


All data collected and verified during the data collection phase was captured and analysed. Through a process of research and market analysis, valuers assessed and verified the value of each property, based on market value (the price that would be achieved between willing buyer and willing seller). A Valuation Roll was then certified and handed to the City Manager. The publication of the Valuation Roll was advertised for a period of time during which the public were able to submit objections to the municipality, in the prescribed format. Objections were administered and dealt with by the municipal valuer. Thereafter, the Valuations Roll was finalised and the new rates were applied.


Under the new Act some property owners may have been required to pay higher rates while others may have received a discount on their rates. It all depended upon what the property was valued at according to the local municipality. Areas that had not benefited from the lsat property boom were more likely to find that their rates had stayed the same, or even declined. The act provides for the revaluation of all properties and a property should be re-valued every four years.


Media investigations around the time of the implementation of the new Act speculated that the process used to re-value properties was flawed and unfair. Not many residents had a knock on the door from a property inspector to re-value their properties. The municipality basically sampled what was happening in terms of sales in and around a particular neighbourhood, and based their values of houses in that neighbourhood on averages.

 

Sectional Title Rates:

Owners of sectional title units are now charged rates and taxes individually on their units and have to pay rates directly to their local municipalities. Rates and taxes are no longer levied on the body corporate, which used to the be apportioned to each individual owner through the monthly levy.