Municipal rates and taxes are a significant monthly cost that every Cape Town building owner must budget for – and they are about to go up again. When the City of Cape Town raises its rates in August, you could find yourself paying thousands of Rands more each month on your property.

Fortunately, building owners have the right to object to increases in municipal rates. Here’s the low-down on rates and what to do if you feel your assessment is unfair.

Municipal rates – what you need to know

Many of us pay our municipal rates as a matter of course, trusting that the municipality has calculated them correctly based on the value of our properties. But what if your property is worth less than the municipality thinks?

The valuation that the City of Cape Town uses to assess your building for monthly rates has a huge impact on the final figure you’ll have to pay.

That’s why it’s essential to make sure that the City hasn’t overvalued your property.

  • The City of Cape Town bases its general valuation on the average sale price of similar properties in the area.
  • If five other buildings of similar size have sold for around R20 million lately, your building will also be valued at roughly that much.
  • In cases where there isn’t enough data about recent sales to make an accurate estimate, the City will send out an assessor to calculate the market value of your property.

How rates are calculated on commercial property in Cape Town

Currently, the annual rates payable on a commercial building are calculated using this formula:

  • Annual rates = property value x 0.014308.

This figure is divided by 12 to determine your monthly rates payment.

Working off the same figure of R20 000 000, the monthly rates payable would come to R23 846.70 – a significant monthly overhead for any property owner.

Making sure your property is fairly valued and being aware of the rates charged each year is essential for all commercial building owners in Cape Town.

How much are rates expected to increase in 2019?

The City of Cape Town should send a notice to property owners in July, informing them of the new property rates that will take effect in August. After the large jump in rates that affected commercial property owners in Johannesburg last year, some building owners in the Mother City are concerned that they are in for a similar shock.

Although there’s no telling what the rates increase will be this year, some experts believe that the jump won’t be too big this year.

The reasons for their optimism include the City of Cape Town’s extensive property market data (considered the best in SA) and a softer property market that will keep the average sale price down.

What to do if you feel you’re paying too much

Since there’s no telling for sure what the City’s rates increase will be, it’s important to know how to object to your assessment. While the annual rates on commercial property are fixed as a percentage of your property’s value, you can object if you feel that the City’s valuation is wrong.

Ratepayers can contest a valuation on the City’s website. Objections must reach the city no later than 30 days after the new rates are announced.

When objecting to a valuation, a market valuation carried out by a registered estate agent should be provided as supporting documentation.

Commercial Space will be happy to provide a fair valuation, based on the latest market data, for any commercial building in Cape Town.

If you’d like more information or would like to contest your property valuation, contact our team today.