It’s hard to ignore Joburg’s distinct air of neglect: its litter-encrusted streets, the thousands of nonfunctioning streetlights, the cracked roads that ooze water, the trenches gouged out by various city departments for projects that are never properly completed, and the ubiquitous potholes.
So it’s no surprise that the metro’s latest general valuation roll has set off a firestorm of complaints from its residents, with the Organisation Undoing Tax Abuse accusing the city of “steamrollering” ahead with “unreasonable” property valuations — an average increase of 37% since 2018, by its estimate.
At issue is not just the overall increase in the general valuation roll and its knock-on effect on rates, not to mention a blanket 2% rate hike over and above that. It’s also that the upwards valuation has taken place against the backdrop of a depressed property market — the result not just of South Africa’s economic malaise, but also of Joburg’s slide.
As Seeff Sandton MD Charles Vining tells the FM, sellers are getting just 75%-80% of their asking price. So “any proposal by council to increase values and thus rates should be challenged, as in my view real prices have dropped”.
But Piet Eloff, director of valuations at the metro, is adamant that the administration bases its valuation estimates solely on “market value”. And by his figures, the total increase in the city’s general valuation roll since the most recent one in 2018 and now is 15% for residential properties.
Eloff’s team of 70 valuers receives a weekly report from the deeds office of all property sales in Joburg. From these, it creates a “basis” — a rate per square metre. “Then you look at your specific area, and look at the median,” he tells the FM. “We create a typical property for that area given size and location, and then you take that and compare it with others.”
To do all this, the city has to rely on computer-assisted mass appraisals; it can’t individually value each of the more than 934,000 properties under its watch. So why doesn’t it use data from Lightstone, which tracks the sales in an area and is used by banks in providing home loans? Sihle More, group head of property for Joburg, says the city would have to put out a tender to do so, and it may also lose valuable institutional memory if its contract with a private provider should end.
“Is it the perfect roll we’ve done? There will always be errors, and that’s why the objection reviews and appeals process is there to make sure that all those anomalies are caught,” she says.
Take the case of two residents known to the FM; they live in similarly sized houses a few streets apart, in Melville and Westdene. While Melville is regarded as the “better” suburb, the resident there saw a 6% increase in their property valuation; the Westdene resident received a valuation increase that was 62% higher.
In response to the discrepancy, Eloff says: “Previously we may have undervalued [a property] in the first place. Second, the person could have done improvements to a property. Or we overvalued it.”
Importantly, Lightstone data also determines a property’s value as it is today; for the city’s valuers, properties have a fixed valuation date: July 1 2022 in this case.
If the property market tanked after this, too bad. And it did: six rate hikes since last June have taken interest rates to a multiyear high — and dealt something of a death knell to the property market.
“The market of today cannot be compared to the market of July 1 2022,” says Eloff.
Which is cold comfort if you are now paying higher rates based on a valuation that bears little resemblance to what you could, in reality, sell your house for.
Still, Eloff tells the FM there are 439 “townships” (suburbs) where property valuations actually did decline between 2018 and 2023 (see table).
And while about 40,000 residents objected to their new values, that’s fewer than in 2018 (55,000) and 2013 (86,000). It works out to 4.3% of the city’s properties, within the city’s 4%-5% target range.
So far, 5,000 of the objections received have been dealt with, and those residents should have received an e-mail from the city. A further 15,000 have been finalised. The city has committed to tackle the remaining 20,000 by September 30.
But what happens if you have objected to your new, unsellable valuation, yet you’re still paying hundreds more in rates every month? For a start, you have to appeal the city’s decision. And that process can be long; Sandton City owner Liberty Two Degrees fought a five-year battle over its 2018 valuation — and lost.
In part, the problem is that there are only three valuation appeal boards (the city has asked for funding to establish a fourth), and they’re staffed by part-time independents.
If an appeal goes in a resident’s favour, says More, a new value is sent to a “land information system” that feeds into the billing system, where the resident will be billed on the correct value.
“For the period we have billed you ‘incorrectly’ ... we have a team of transaction processors who would then adjust the account. And if you were paying the account in full on the higher value, we then give you a credit with interest at the prevailing rate. If you don’t ask for it as a refund, it will sit as a refund on the account until it’s used up.”
A cynic could say that’s a great way to temporarily inflate the city’s revenue. But, unsurprisingly, that’s not a view shared by newly appointed Joburg CFO Tebogo Moraka.
“When we model our revenue in terms of budgets, we take into account certain percentages of objections,” he says. “The normal rate is 4%-5%, so we would adjust our revenue accordingly.”
The city expects to collect R18bn in rates — its second-biggest earner after electricity sales — from residents this year, though it forgoes revenue of R2bn due to pensioner and general rebates, its extended social package and a percentage of incorrectly valued properties.
Still, the mood has clearly soured among many residents, who feel they are paying hand over fist for what feels like dwindling services. It’s one of the factors cited by estate agents for the semigration trend to better functioning towns.
More, however, points out that the Joburg property market isn’t stagnant: the city has seen turnover of about 4,000-5,000 properties a month in the past three months. So you may think people are fleeing, she says, “but the inverse could also be happening — a lot of people are coming in”.
It’s true: for every seller, there has to be a buyer. The estate agents contacted by the FM take a dim view of this argument — not least because of the drop in real house prices Vining points out, but also because of the number of homeowners “decid[ing] to head for perceived greener pastures”, says Pam Golding area manager Jason Shaw.
Just how awake are the city’s functionaries to residents’ perceptions that their metro is in a state of terminal decline?
Says Moraka: “I’m a ratepayer myself — I must feel that the city is working for me. For you to be happy to pay your bill, you need to see visible change in the city, you need to see that things are working.”
Most of Joburg’s woes — as with metros across the country — boil down to years of underinvestment in essential infrastructure, worsened by the coalition chaos the city has endured since 2016.
The other challenge is actually getting rates out of residents; average collection rates across all services for the 2023 year to end-June were 88.4%, against a target of 91%.
Certainly, what happens at a technocratic level has been completely overshadowed by the insanity of Joburg’s coalition politics, where a mayoral revolving door has seen three incumbents in just 18 months.
For precisely this reason, the government last year passed legislation to try to insulate municipalities from council chaos. It could be a game-changer for the remaining technocrats who just want to get on with the business of running a city.
In Joburg’s case, it means key positions in the municipality will be offered on a permanent, not a contract basis.
“At the moment, the only person on a fixed-term contract is the city manager — everyone reporting under him will be on a permanent basis. Because at least that gives you security of tenure,” says Moraka.
The National Treasury is also keeping a beadier eye on its equitable share — in the city’s case, R7bn — as leverage. The message is: either insulate administration, or we withhold the funds.
“Without that money we would collapse. It is a good strategy and it’s a good thing that they’ve realised they need to play a bigger role — especially in this coalition environment,” says Moraka.