It is a well-known fact that most property owners in Cape Town are left feeling less than satisfied when the City does its valuations of properties for purposes of determining the annual rates payable in respect of such properties.
Every time the new valuations are issued, owners quickly embark on the process of Appealing their property’s valuation as mostly it is felt that the increase is unjustified if compared to the “market” value. You see, Capetonians have high expectations in respect of the profits but low expectations in respect of their rates.
For example: a property’s municipal value may have been R2,000,000.00 in 2017 and increases to R4,500,000.00 in 2021 whereas the market value (at which the property could be sold in 2021) is only R3,250,000.00. This imbalance is what causes all sorts of inquiry and unhappiness and owners always feel that they are being exploited.
The reality is that, because properties are re-evaluated in Cape Town at least every 4 years, the City applies the average increase in property values for properties sold in the suburb over such 4-year period as part of its formula to determine the new municipal value. By using actual property sale values in the calculation, properties should therefore grow into their new values during the following 4 years.
Properties in certain Cape Town suburbs show annual value increases far beyond the national average and for that reason, the perceived imbalance in municipal re-evaluations of such properties may be more pronounced. But the reality is that if people are prepared to pay 30% to 50% more for a property than what it was worth a year or two ago, then a similar rates increase may be expected.
It is all connected: the more profits you make the more rates you pay.
And this is why Cape Town property owners pay more rates compared to owners of properties in other towns and cities.