Calling it potentially the "final nail in the coffin of home affordability", Mike Bennett, managing director of Durban's ProProp, says the new system, which advocates home owners paying R0,009 cents for every rand in the value of the property, will see rates in some suburbs rise by up to 140%.
Commenting on the results of his group's survey, Bennett says while the theoretical value of the rates increase is around 15%, in reality it's in excess of 100% in some areas occupied by our new middle class (policemen, nurses, teachers and bank admin staff)".
"According to our matrix, the rates in randomly selected suburbs such as Caversham Glen will increase by up to 84%, Marianhill Park by up to 118%, New Germany anywhere from 91 to 124% and Pinetown from 96 to 142%," he says.
eThekwini Municipality's recommendation that home owners across the board be exempted from paying rates on the first R120k, regardless of market value is merely a "smokescreen", he continues.
"It is intended to deflect attention from the harsh reality of a situation that I believe has its origins in imprudent spending for which the rate payer is being billed. Two examples spring quickly to mind: uShaka Marine World, which has cost millions in the last two years, and Durban Transport, which though privatised in 2003, has also cost a fortune to keep afloat since then. I have no idea how many more millions or even billions the new sports stadium is ultimately going to cost but you can be sure that the rate payers are going to end up paying for it, too."
"Coming on the heels of the new Market Valuation on Property Rates (MPRA) which has seen residential property values increase by nearly 280% on average, it's going to hit the pockets of thousands of property owners whose salaries are already marginalised by rising interest rates, living and petrol costs."
Bennett says he fears the new rating system will herald the end of the home ownership road for many, particularly those on fixed incomes and pensioners.
"The average home owner is already battling to put bread on his table after paying bond installments of around R5k to R7k a month as well as car repayments, insurance, medical, schooling and petrol. Bearing in mind that one can't get blood out of a stone, where does the municipality think these people are going to find an extra R500 a month? The problem is not the valuations of property - those are close to reality - but the Rand increase from previous rates to the rand value of the new rates payment."
Noting further that the proposed cent-in-the-rand rates for Cape Town and Johannesburg are R0,00459 and R0,005 cents respectively, Bennett says he would like to know how Durban's higher rating can be justified. Could it be that Durban is not as efficiently run as Capetown or Johannesburg, he asks. With ratepayers having until 31 March to object, he is urging them to stand together and protest.
"As a significant contributing force to the municipal coffers, we need to demand a more inflation-related increase. The way I see it, working on 6% inflation and another 8% for municipal inefficiencies, this means the rate increase shouldn't be more than 14%.
"The rate paying public has a right to know where their money is going and I believe that the eThekwini Municipality should produce and publish a detailed budget for their shareholders (the ratepayers) to study," he says.
Click here to view some comparisons of old rates and new.
Readers' Comments
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The sad thing about this is that most people are financial illiterate. Most of the property owners in the middle class bracket I've spoken to in the past few weeks about the change in their rate payments as from the 1st of July 2008 have no clue about how much they will be paying by then. I think most people will have one the biggest surprise, come the 1st of July 2008.
If I can make an example about myself, I live in three-bedroom duplex that I bought in 2005 for R350k and I am currently paying levies of R750 a month. According to the new evaluation, it is valued at R850k and I will be paying R1062.50 a month on rates alone excluding complex levies, water, sewerage and lights. I am also expecting almost 100% increase, come the 1st of July. I do not want to even talk about my other investment properties.
The sad thing is, yesterday the government was and is still encouraging people to be property owners and yet the same government is making rates more and more unaffordable especial for the middle class and below middle class. Towards the end of this year and the beginning of next year, we must expect the biggest bank repossessions. For bargain hunters in the property market there will be lots and lots of buying opportunities. – Bulelani Goodwill Ntloko
eThekwini seems to have taken an area and based the value of the property on that. In one street two houses can vary in price by as much as R500k based on the condition of the property - whether or not it has a swimming pool etc. Each house has its own value. - Phyllis
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