Cape Town homeowners urged to challenge new property valuations

You can also listen to this podcast on iono.fm here.

JEREMY MAGGS: I read that nearly a million Cape Town homeowners could soon be paying significantly more in rates, as the city’s new municipal valuation roll comes into force.

From 20 February, if I’m not mistaken, property owners will have a narrow window to object to computer generated valuations that will lock in rates bills until 2029.

Property data suggests many homes are overvalued.

Most homeowners, though, miss the objection deadline, and those who don’t could be overpaying by hundreds of rands a month.

Listen/read: Hill-Lewis slams Eskom and Nersa over proposed electricity tariff hikes

Let’s get into this debate. I’m in conversation now with Storm MacLennan, who is head of sales for southern suburbs at Jawitz Properties.

Storm, nearly a million properties is a huge number, and welcome to you, how confident are you that this valuation process is systemically wrong, rather than just an inconvenience for the homeowners?

STORM MACLENNAN: Well, Jeremy, the idea behind the valuation process should actually make the valuation process more convenient for homeowners. The problem that we need to take into consideration is the fact that it is done by a computer and not by a person.

A human being is able to take in the surroundings, is able to take in various factors like the condition of the exterior of the property, access to the property, surrounding noise proximity, views being blocked by new developments, those kinds of things. Those all affect the value of a property.

Read:
Hidden R3trn property wealth could unlock SA growth and inclusion
CoJ loses two more high court incorrect billing cases
Longtime Cape Town homeowners face forced sales

Whereas a computer-generated valuation, you simply can’t see that. It simply takes into account the plot size, the zoning, the roof area, and then the address, of course, where it’s located.

JEREMY MAGGS: Is the objection around the technology or potentially a flaw in the technology, or as some are suggesting, a deliberate, revenue maximising exercise that is simply dressed up as automation.

STORM MACLENNAN: Jeremy, I don’t think it’s necessarily a deliberate revenue maximising exercise. I do think it’s with a goal of maximising the efficiencies of the metropole, of the City of Cape Town’s valuing systems.

I do just think that unfortunately, the system isn’t taking into account enough of what is required in order to value a home effectively and give a real-life, accurate valuation.

JEREMY MAGGS: What’s the sense that you’re getting about the objections and about the objection window? What’s emerging on that front, Storm?

STORM MACLENNAN: The objection window traditionally is around 60 days, which is quite short.

Homeowners are so focused on day-to-day life and cost of living and keeping their head above water, that they’re not necessarily always in the know about when these new valuation rolls come out and how to access them and how to object.

Having a short 60-day window is quite a short timeline for them to do so. We’re trying to just make sure that, at least in our areas, that the public is aware of how to do so, and that we’re here to help and assist them work through the process.

Read: Rising rates rage: Cape Town homeowners push back

Because as you’ve pointed out, there is a potential for a significantly increased valuation which will raise their rates.

JEREMY MAGGS: Storm, the city argues that Cape Town delivers value for money through services. I guess the question is, does good service justify a potentially flawed valuation?

STORM MACLENNAN: I don’t think anything justifies flawed valuations. But I can’t deny that the City of Cape Town is providing phenomenal services and it’s clearly evident in the property prices at the moment.

Semigration is larger than ever.

People are flocking to the Cape to be here because of our infrastructure, because of our services, because of the obvious natural beauty, but mostly because of how well the metropole is run.

Read:
Soaring Cape Town house prices mean sky-high rates
More pain for Cape Town homeowners as property prices bite in new tariffs

But that doesn’t equate for a flawed valuation service. I still think that people should be getting realistic, honest and accurate valuations for their homes.

JEREMY MAGGS: I’m assuming that the situation is not really going to have an impact on sales, particularly in the southern suburbs where there is, and it’s my understanding there’s probably more demand than there is supply.

STORM MACLENNAN: That’s very accurate. Yeah, there’s definitely more demand than there is supply. But there is a potential for it to have impact on sales, specifically around the more upper end and higher price range properties that have been owned by one family for generations.

Listen/read: Can you actually afford to rent in the Western Cape?

They might be asset rich with this beautiful big home but cash poor because of the current market, and maybe jobs aren’t following through with that.

So what’s going to happen is if this computer assisted valuation system is providing them with an inaccurate rates account that is now potentially significantly higher, they’re not necessarily going to have the cash flow to be able to afford to live in that beautiful home.

JEREMY MAGGS: To the best of your knowledge, the automated system that the City of Cape Town is using right now, is this the first time that it’s been done? Is this a pilot project or have there been similar problems in the past?

STORM MACLENNAN: I believe it’s been tried in other areas, but this is the first time that it’s been rolled out in the Western Cape.

JEREMY MAGGS: How realistic is it for the average homeowner then – let me just circle back to what you were talking about a little earlier – to compile credible market evidence about the valuation of their property without professional help and without missing this 60-day deadline.

STORM MACLENNAN: Yeah, it’s absolutely vital, it really is. I think there are lots of resources out there now. The internet is a marvellous place to go and try to find some information.

There are loads of resources where they can find what they need to apply their minds to, to object to these potential inflated valuations from the new system.

Read/listen:
Airbnb ‘a small factor in high Cape Town rentals’
‘Rampant demand’ for short-term residential rentals in Cape Town

JEREMY MAGGS: Let’s assume that rates are locked in until 2029, given the current system, to which there is a lot of objection. What happens then, Storm, to homeowners who only realise two years down the line that their valuation was inflated? It causes all sorts of problems, doesn’t it?

STORM MACLENNAN: Yes, of course it causes problems. Unfortunately, legally they’ve missed the window, they’ve missed the deadline and they’re locked in for three years paying an elevated rates account. It takes money out of their pocket at the end of the day, unfortunately.

JEREMY MAGGS: It’s going to be interesting to see how this one plays out. Storm MacLennan, head of sales for the southern suburbs at Jawitz Properties, appreciate your time today. Thank you so much.

Read:
Cape Town needs rent control
Inner-city Cape Town: No room for locals

Follow Moneyweb’s in-depth finance and business news on WhatsApp here.