After earlier this year appointing specialist consultant Rates Watch, in partnership with the University of Pretoria, to investigate municipal budgets for the coming year, the South African Property Owners’ Association (Sapoa) said on Thursday that yearly property rates in the country’s metropolitan areas were increasing or decreasing at inconsistent levels.

Medium-term growth in property rates in South Africa’s metropolitan regions ranged between 4% and 11% a year over the past four to five years, while the weighted average growth in property rates was 6.7% a year.

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

“The highest increases were seen in Nelson Mandela Bay, at over 11% a year, followed by Mangaung, at 10.97% a year, and Tshwane, at 10.75% a year,” Sapoa CEO Neil Gopal said at the forty-sixth Sapoa International Property Convention and Exhibition, in Cape Town.

He added that yearly increases in municipal rates and taxes over this period had impacted the economy to the tune of 4 500 lost jobs as well as lost economic output of some R2.8-billion.

“The goal [of the investigation] was to identify key municipal budget information on property-related costs like rates and taxes, electricity and water in South Africa’s 11 largest municipalities. And the findings have done just that,” Gopal noted.

Similarly, the ratio of rates and taxes between commercial and residential properties varied widely across the country. Although a ratio of 2:1 to 3:1 on the tariff for business and commercial properties when compared with residential properties was found, the highest ratio in the research by Rates Watch was 5:1 in Mangaung.

“Also of note is 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 South Africa’s economic policies, something prohibited by the Constitution,” Gopal explained.

Perhaps the most striking observation reported was the inconsistency of property valuations, particularly in the residential sector, where properties were most often undervalued.

“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 ensure municipalities are delivering an equivalent amount of services to their commercial and industrial property sectors,” Gopal said.

He added that the organisation saw 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 vested.

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