Be Warned: Change in Property Valuation
Members of the Middelburg Chamber of Commerce and Industry met with Mr Phumlane Mkhize, Director of Property Valuation, of the Steve Tshwete Municipal on Monday, 17 January 2022. The meeting was chaired by Mr Gerrit van der Merwe, Executive Member: Real Estate.
Mkhize told members that the STLM property valuation system for commercial properties will be changed and introduced in July 2023. The property valuations will be completed by June 2022 to facilitate future implementation. The purpose of the meeting was to inform property owners why the valuation system is changing and how the calculations will be done.
The law on the valuation of property values was amended in 2004. The Act has allowed access to the financial data of your business to determine its value:
- (1) A municipal assessor or deputy municipal assessor may.
(a) require the owner, tenant or occupier of a property which the valuer must value in terms of this Act, or the agent of the owner, to give the valuer access to any document or information in possession of the owner, tenant, occupier or agent which the valuer reasonably requires for the purpose of valuing the propertyWhat does the above mean? The STLM valuer may request your profit and loss account and then review your finances considering rental income and occupancy percentage. The complete profit and loss account or balance sheet will not be considered, only maintenance and expenses directly related to the upkeep of the property. When valuing the property, capital repayments, interest, and other expenses that are not directly related to the upkeep of the property are not considered.It is not uncommon for property valuations in STLM to be well below market values. Depending on the classification of the property, a fraction of the property’s market value is used in the classification of the property. For example, a property currently valued at R13 000 000 and subject to a municipal tax rate of 0.0333 will be taxed at R432 900 per annum or R36 075 per month. If the value is increased to R20 000 000, the monthly tax payable increases to R55 500, which has a drastic effect on input costs. Values are calculated using a market capitalisation rate based on income for commercial rental properties. For owner-occupied commercial buildings, the valuation is based on the average market value of comparable buildings in the same area. Residential properties are valued on the same basis, whereby the property value correlates with the market value, which depends strongly on the designated area.
Although the blanket approach aligns with aligns and common practice, it has provoked strong reactions. For example, a landlord rents out a building for R345 per square metre, while his neighbour’s comparable building can only be rented out for R55 per square metre. This will undoubtedly affect the average rent per square metre used for valuations. If you feel that your property has been assessed inappropriately, you can appeal the value, but not the municipal tax rate, as STLM Council and COGTA make this decision.
Every business has its environment that determines the sustainability of each individual business, tenant and property owner.
The pandemic has highlighted how vulnerable businesses are to environmental changes and input costs. Rent, a substantial cost for most businesses, has come under severe pressure since the pandemic.
Members requested that MCCI appoint a sub-committee to find a solution to ensure that the process is beneficial to both the municipality and businesses. Members interested in participating in the subcommittee, don’t hesitate to contact Anna-Marth Ott at ceo@middelburginfo.com.