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Property Valuations – Lest people forget

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Dear Editor

The announcement this week of new property valuations in Nelson Mandela Bay refers.

The announcement this week that R25 million has been set aside for the re-valuation of properties in our Metro is not so much about the cost that has been budgeted for this task as it is about what many ratepayers consider to be a flawed process.

When properties were last valued in 2007, many ratepayers were smacked with exorbitant increases in their valuations which, coupled with the increase in the basic rate applied meant that individual property rates fluctuated wildly with reported increases of up to as much as 1000%. There was a public outcry when valuation mistakes were exposed and property owners accused the NMBM of fleecing them.

While property owners were allowed to appeal, and many did, that process too was flawed as many appeals were either dismissed outright, not addressed in the given time frame or the appeal documents were conveniently “mislaid”.

2007 was of course at the height of the property boom and market values sky rocketed so the NMBM was always going to be on firm ground when re-valuing properties.

Let me however fast forward to 2012 and remind you of issues you need to factor in when dealing with any attempt to increase valuations (and rates) this time round:

  • by 2008, the South African property market was at an all time high with asking prices far exceeding household incomes; so too were new building costs and builders had full order books to boot
  • in 2008, the bubble burst which sent huge international banks and related industries to the wall; the contagion didn’t just affect the USA but Europe as well and the fall-out has had massive global repercussions.
  • South Africa has weathered the international financial issues well due to a very disciplined Treasury and Minister’s of Finance; we have not escaped altogether though as our resources led economy is at the mercy of our main trading partners and GDP projections have trended down rather than up.
  • decades of high unemployment have worsened with employable adults sitting at a staggering 24% of the total work force; I won’t bore you with at least another 7 factors affecting the SA economy now and in the next 3 year cycle.
  • what is relevant now is that the property market has been in decline since its heyday in 2008.

Homeowners in the lower to middle property markets, who purchased just before markets collapsed, may have overpaid by up to 50% and more!. I have heard of someone who bought a 2 bed roomed townhouse in 2007 for R650 000 and can’t sell it for R450k. One couple upscaled to a 3-bed for R1.2m but are battling to get R850k and walk away debt free because the main breadwinner lost his job!

Without labouring the point, what is relevant is that many REAL property prices (market value) have decreased from the 2007 levels rather than increased! For market value, you have to use what a willing buyer is paying a willing seller in TODAY’S market – not the numbers you see advertised in property news sheets and for sale columns.

I summarise below the 2012 process to better understand the issues:

  • the municipal valuator is George Rentzke
  • he says that the value of properties will be based on the market condition which allies from July 2 2012
  • the valuations of individual properties would only be communicated to owners in March 2013
  • only thereafter, owners would be allowed an opportunity to appeal and lodge objections
  • and that will have to be done sometime before the new rates kick in on 1 July 2013
  • 255000 properties including commercial and industrial will be valued
  • It is not clear who exactly will carry out the valuations although an evaluations project management official, Fareed Fakir, is mentioned in media coverage

What can you do?

There are many steps you can take to obtain a fair valuation of your property:

  • you should have had your property valued for insurance purposes; insurance companies may do this for you for free; on the other hand, you may have had a claim against your policy for damage in which case the assessor would have told you whether you are correctly insured or not.
  • ask a reputable real estate company to give you a fair market value but beware, what they would like to sell it at (inflated) is not always a realistic market price and therefore you need to get them to give you comparable prices of similar properties sold in say, the past 6 months.
  • your property may be bonded and your bank or lender may be able to give you their valuation which the value on which they base their loan.
  • show houses that sell are another avenue to explore; ask agents in the area where your property is for sale prices of similar properties to your
  • ABSA and FNB (as do others) both produce market research of property prices in metropolitan areas such as the NMB; these are available on request or by searching their web sites

Finally, if you wish to appeal or lodge an objection in March 2013, please don’t just drop off forms at the municipal offices in the Metro without getting them to sign receipt of the documents and the person’s name. Send a copy to your Ward Councillor and your Ratepayers Association as the NMB have an unfortunate habit of “mislaying” property valuation objections. Follow up regularly so that it does not miss the cut-off deadline.

In conclusion, I copy in the words of the Nelson Mandela Bay ratepayers Association Chairperson, Kobus Gerber “the valuation is an extreme waste of taxpayers money. Property values are on the down now. The municipality should rather do research on devaluation of property. It won’t cost R25m for that!”

Regards

Cliff Hall

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Port Elizabethan

This author is a 'catch-all' for occasional articles and letters written to MyPE. The Author of each article can be found in the signature at the bottom of each individual article.

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Comments

  1. Suggestion:  Contact an independent property valuer who will give you an unbiased, substantively motivated opinion of what your property should be worth on the date of valuation.  This will cost money and like all things you get what you pay for.  One must way up the potential decrease in rates with the cost of the valuation.

    Be careful when reyling on insurance replacement costs as these only take improvements into consideration and have no regard for that all important location of the property. 

    With regards to rates payable, if all factors are held constant and each property depreciates by say 15% (arbitrary number for illustration) and the budget allocation for rates income increases by 10%, all rates account holders (exlcuding indigents and special cases) will have an increase in rates of 10%.  The rating factor will be adjusted upwards for each of the property categories in order that the total rates collected will amount to that budgeted for.