Overinflated Joburg property valuations: 'A conundrum'
Category Blog
With the closing date for objections to Joburg's General Valuation Roll (GVR) 2023 behind us, many property owners are still struggling to accept the often shockingly high municipal valuations.
And considering the City of Johannesburg's financial woes, and the increasing debt it finds itself in, there is pressure to exaggerate property values, and hike rates and taxes.
Many properties have been valued at as much as 10 to 30% above the 2018 valuation roll.
The coffers are empty
It's the 'between a rock and hard place' scenario, property price increases have been shockingly low since the Financial Crisis in 2008, trending way below inflation for 15 years. However, public servant salaries, materials and the cost of services have increased at a much higher rate, in some instances exceeding inflation.
Subsequently, properties in upmarket Johannesburg and Sandton suburbs have generally sold at a lesser price of up to 15% below their 2015 sold prices.
Add to this dilemma deteriorating service delivery, compounded by increasing outages, old infrastructure and lack of maintenance. The Johannesburg City Council is now under huge pressure to meet the challenges, which will need a substantial increase in expenditure - but the coffers are empty! A conundrum indeed! So, increasing municipal valuations has been an attempt to reduce the deficit.
Not only the luxury property market
It's not only affecting luxury properties. The upping of municipal valuations and hiking of rates and taxes is affecting every property owner - and making us all 'very poor'. Over 70% of properties in Johannesburg have been valued at a higher rate, while service delivery continues to deteriorate, or is non-existent.
This is damaging our property markets, and South Africa is rapidly losing its lustre as investors and buyers shy away from the high costs of property ownership, relative to the stagnant values.
For landlords, the high costs of ownership (which keep going up with inflation) are not always easy to pass on to tenants, while the risk of a property standing vacant, or a tenant who doesn't pay, are factors deterring buy-to-let investors. Levies, which are inflation driven, also appear to be high relative to the value of the unit.
This is why South Africa has become a lot poorer, bar the Western Cape where a healthy property market and demand still exist. But this is driven by a well-run council, and the fact that the province remains a good tourist destination patronised by foreigners and moneyed South Africans.
Simply put, services work in the Western Cape! Admittedly, they receive higher rates and taxes on the back of appreciating property prices, whereas in the rest of SA the government has made us all 'very poor'.
What are you paying for?
According to the City of Joburg, 934 194 properties within a 1 644 square kilometre radius - 671 394 freehold and 262 800 sectional title - were included in the valuations, with 89% of these classified as residential, 5.4% business and commercial, 2.8% vacant land and 2.8% as other properties.
With GVR 2023, the City announced an average rates increase of 12% effective from July 2023, bringing the total valuation of all properties to R1.5 trillion, up from R1.4 trillion in 2018. This doesn't take into account the huge informal settlements and properties valued at under R350 000, which are exempt from paying rates.
We should all be asking the question - where is our money going? What are property owners actually paying for, and what are they getting in return? And what is the 'municipal value'? It is definitely not the market value!
Rates increases are outstripping current inflation, placing increasing pressure on consumers already battling to make ends meet.
And of the total rateable properties, how many property owners are actually paying their rates and utilities bills? Who are we subsidising, while we continue to get such abysmal service delivery?
The over-reliance on ever-increasing taxes on middle-class South Africans is not a sustainable way forward.
You should be worried
So, what can be done about this dire situation? For property owners to object in their personal capacity is useless in the fight for a better-run city - we will keep paying the price, while we all get poorer.
Only some kind of class action law suit, and demanding that our ward councillors play their part in holding leaders accountable, will be able to bring about the change we need.
Author: Ronald Ennik
