Rates and Taxes a burning issue for South African Property Owners

By
Font size: Decrease font Enlarge font
The yearly rates, taxes and services increases in South African municipalities were seen as inflationary and contradict the aims of building the economy of the cities and creating jobs, a panel discussion at the SAPOA Convention said. The yearly rates, taxes and services increases in South African municipalities were seen as inflationary and contradict the aims of building the economy of the cities and creating jobs, a panel discussion at the SAPOA Convention said.

THE yearly rates, taxes and services increases in South African municipalities were seen as inflationary and contradict the aims of building the economy of the cities and creating jobs, a panel discussion at the SAPOA Convention said on Thursday.

The panel of high-level leaders titled ‘Property Rates and Taxes: Making cents of it’, included the likes of Ben Espach: Director at Rates Watch, Izak Petersen: CEO at Dipula Income Fund, Marc Wainer: CEO at Redefine Properties, Rob Kane: CEO at Vunani Investment Property Fund, Dr Douw Boshoff: Programme Leader Real Estate BSc & Hons at the University of Pretoria and lastly Veronica Mafoko: Department of Cooperative Governance. Directorate: Municipal Finance and Viability.

According to SAPOA, a commercial property sector representative body with 1200 members, the yearly increases in municipal rates and taxes have impacted the SA economy to the tune of 4,500 lost jobs as well as lost economic output of some R2.8 billion.

These findings were announced by the South African Property Owners’ Association (SAPOA) at the 46th SAPOA International Property Convention and Exhibition held in Cape Town. It comes in the wake of SAPOA earlier this year appointing specialist consultants Rates Watch (Pty) Ltd, in partnership with the University of Pretoria, to investigate municipal budgets for the coming year.

“The goal was to identify key municipal budget information on property-related costs like rates and taxes, electricity and water in SA’s 11 largest municipalities. And the findings have done just that,” says SAPOA CEO, Neil Gopal.

Medium-term growth in property rates in SA’s metropolitan regions has ranged from 4% to 11% a year over the past four to five years. The weighted average growth in property rates was 6.7% a year.

“The highest increases were seen in Nelson Mandela Bay at over 11%, followed by Mangaung at 10.97% and Tshwane at 10.75%,” reports Gopal.

The lowest increases were posted in Ethekwini, Polokwane and Ekhurhuleni at 4.3%, 5% and 5.6%, respectively.

Similarly, the ratio of rates and taxes varies widely across the country. Although a ratio of 2:1 to 3:1 on the tariff for business and commercial properties was found when compared to residential properties, the highest ratio in the research by Rates Watch was 5:1 in Mangaung. Of note is also the fact that the ratios are the effective ratios after taking into consideration the rebates for residential property.

“SAPOA’s key concern is to ascertain whether or not these high rates and ratios inhibit SA’s economic policies, something prohibited by the Constitution,” explains Gopal.

Marc Wainer, CEO of Redefine Properties, said rate increases were often inconsistent.

"Residential properties can face much lower rates as they are undervalued so if we own commercial property we have to pick up the slack, he said.

Perhaps the most striking observation reported is the inconsistency of property valuations, especially in the residential sector, where properties are most often under-valued.

But Veronica Mafoko from the Department of Cooperative Governance argued that property owners needed to start believing in General Valuation Roll as they are systems in place to undertake objections.

“The net result is to increase the ratio paid by commercial and industrial properties. Effectively, owners of accurately-valued properties end up paying too much. SAPOA wants to be sure municipalities are delivering an equivalent amount of services to their commercial and industrial property sectors,” says Gopal.

“We see this study as the beginning of a process to engage with the Department of Coorporative Governance and Traditional Affairs (COGTA), under which the jurisdiction of the Municipal Property Rates Act vests.

“We look forward to constructive engagement with COGTA and its newly appointed Minister, Pravin Gordhan, on municipal rates and other issues that impedes the property sector and ultimately economic growth and jobs,” concludes Gopal.

Read more on:

Polokwane Property Market  |  South African Property Owners Association (SAPOA)  |  SAPOA Convention and Property Exhibition  |  Neil Gopal  |  City of Tshwane  |  Marc Wainer  |  Rob Kane  |  Izak Petersen  |  Ethekwini Municipality  |  Nelson Mandela Bay Municipality  |  Ben Espach  |  Veronica Mafoko  |  Dr Douw Boshoff  |  Dept of Coorporative Governance and Traditional Af  |  Mangaung  |  Ekhurhuleni