Real estate companies, weathering a depressed market in SA’s richest metro, Johannesburg, are disputing the general valuation roll for 2023, which shows the property base rose 12% to R1.59-trillion in the past five years.
They say such a rise is impossible in the prevailing economic and market conditions. It comes amid suggestions that the city is artificially inflating the value of properties to make up for revenue shortfalls.
Municipal valuer Piet Eloff handed over the roll for 2023 to acting city manager Bryne Maduka on Tuesday. In it, he said the Joburg metro had 934,652 properties on July 1 2022.
Eloff said the residential category alone accounted for R1.1-trillion, followed by business and commercial at R419.6bn, vacant land R34.8bn, and the other properties category of R79.6bn.
Detmar Nuttall, sales manager for Seeff, one of SA’s leading real estate brands, said: “We would agree with the general sentiment that property prices in Johannesburg have not been rising to any notable degree. There are obviously always exceptions.”
He said prices in the Johannesburg area have for some time been under pressure. “We can see a downward trend. [Prices] are remaining fairly flat with very little growth; offers are coming in lower than asking,” said Nuttall.
Weaker demand
Weaker demand, with emigrating sellers being prepared to accept lower offers and opting for quick sales, contributed a lot to this trend, he said.
“Purchasers’ buying power is less and so they are making lower offers, influencing average property prices. There are more properties on the market than buyers, so sellers are having to reduce asking prices to secure a sale,” Nuttall said.
“I see the trend only changing in the early part of 2024 if interest rates start to stabilise.”
Saxonwold and Parkwood Residents Association chair Bill Haslam said the increase in the metro’s property base to R1.59-trillion was “probably incorrect because of the economic situation in SA, especially here in Joburg”.
Semigration
Haslam said: “A lot of people are semigrating to the Cape; they are selling their houses. “It’s a buyers’ market [and] property prices have gone down significantly.”
Nelson Ferreira, Gauteng regional head for Pam Golding Properties, said: “The City of Johannesburg started the ball rolling with the overvaluing of properties the last time they revalued the property roll, dismissing most objections at the time.”
The result is that ratepayers have been “paying excessive rates every month on inflated values. It now appears that ratepayers may be faced with the same problem again.”
Ferreira also said the industry is experiencing an oversupply of properties on the market.
He said the buyers were “spoilt for choice and are seeking to capitalise on the value for money which is far more readily available in this current market”.
He said: “In some suburbs, sales are on average being achieved at a discount of about 15%-20% on realistic listing prices. However, that said, the demand for homes is definitely there when the price is right.”
This reality, said Ferreira, creates a problem for all those who continue living in homes that are probably overvalued.
“Seller motivation and/or urgency to sell is equally affecting the price drop, especially when it is for semigration to other provinces or regions, or emigration. As a result, some homes stand empty, because the sellers cannot realise a price that is acceptable to them.
“In some instances, this has a positive spin-off for the rental market,” he said.
“Positively, the banks remain competitive in terms of granting bonds. However, those in the lower price bands are finding it more difficult due to price sensitivity, given the higher interest rates and economic pressures.”
Ferreira added that the residential property market “is facing a number of headwinds, with excessive property rate taxes proving to be a significant challenge”.
Loan facility
The metro is under financial strain, which the previous DA-led council attributed to the council’s failure to approve a R2bn short-term loan facility from the Development Bank of Southern Africa in November 2022. The council has since been replaced by a new coalition government. This coalition, which previously stifled the approval of the R2bn loan, now says it will actively work to have it approved.
The Ekurhuleni and Joburg metros were in the red by more than R2bn in September 2022 and were struggling to pay staff and service providers.
Eloff has said tariff increases would be decided by the metro when it embarks on its budgeting process in March or April.
Another estate agent told Business Day that there was “no growth” in Joburg’s property market. “I see what the council is trying to do. The council is short of money, they are looking to raise money so they need to get more rates by artificially inflating the value of the property to bolster their coffers,” the agent said.
Siphamandla Mkhwanazi, a senior economist at FNB, told Business Day: “Property prices in Johannesburg have underperformed ... Anecdotally, the city is also dealing with emigration of talent (mainly those with superior buying power), which in turn dampens demand and house price growth, especially in affluent suburbs.”
Mkhwanazi said the bank’s estimates show property prices grew 12.6% in the Joburg metro between the third quarter of 2017 and third quarter of 2022.
“However, this growth is very uneven, largely concentrated in lower- to middle-income neighbourhoods. For instance, prices in Sandton have only grown by about 5% in the last five years, compared with 15% in Midrand. So location also matters,” he said.
The valuation roll will be advertised in newspapers on February 8 and published in the provincial gazette on February 15. It will be open for inspection and objections until March 31.
The roll will be available on the metro’s website during this period. It will be implemented on July 1.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.