Property value: How it’s calculated + the effect on your monthly rates

Article summary

• The local government conducts an official property valuation every four years. The value of your property is updated during this process, and new municipal rates come into effect shortly after.
• Property valuation is conducted with the aid of technology known as CAMA (Computer-assisted Mass Appraisal) which calculates the value of a property based on statistical data from the area where the property is located.
• Property owners can object to the local government’s valuation of their property within 60 days of being notified of the change.

Both sellers and buyers will be interested to know the methods by which property values are determined.

Local governments conduct official property valuations every four years and use precise technology to calculate values. These values are important for two reasons:

• Buyers and sellers have an idea of how much the property will sell for.
• The value of the property affects municipal rates.

Property value: The role of technology

• Property values are determined with the assistance of software known as CAMA (Computer-assisted Mass Appraisal), which is used by many cities worldwide.
• CAMA analyses an area and looks at all the sales that took place. It records the sale price and size of each property that was sold.
• When a property is valued, CAMA analyses the average sales price of other properties of a similar size in the area to determine the value.
• No doubt there are a number of other variables that contribute to property valuation, such as the crime rates in an area. However, the property valuation process assumes that such factors are reflected in the average sales price for properties in the area.
• Of course, even with computer technology, there is room for error, hence why homeowners are entitled to object to the valuation of their property, but only within 60 days of the city notifying them of the property value.

CAMA vs estate agents

Even with the technology on offer, there is a role for estate agents to play.

The primary factors both estate agents and CAMA look at are:

• The average price at which other properties in the same area were sold.
• The size of the property.

However, differences include:

• The city conducts property valuations every four years, whereas estate agents can do so on any given date.
• Estate agents can provide a valuation of properties in areas where not many sales take place (specifically expensive areas like Clifton), whereas CAMA requires a large number of sales to have taken place in an area so it has data to work with.

The effect on levies and rates

Estate agents can be helpful, but it’s the city’s official valuation that will be used to determine rates and levies.

As mentioned, the property validation is conducted by local governments every four years, and the new rates come into effect shortly after.

Property owners should have their properties privately appraised to determine market value, so they have a number to compare with that assigned by the local government during the official property valuation. They can then object to the official valuation if they feel it does not reflect the market value of their property.

The next property valuation

As of 2023, the official property valuation will take place on 21 February 2023, and the updated rates and levies (based on the new property values) will come into effect in July 2023.

So homeowners should brace themselves for the valuations on their property to change, and consequently their rates.