Rawson Properties MD, Tony Clarke reports that some of his franchisees have recently run into problems caused by significant differences between the municipal valuation and the achieved sales price of a property '“ because the Receiver of Revenue is entitled to calculate transfer duty on whichever is higher.
Since the revaluation by the municipality of Cape Town residential property, said Clarke, a fair number of homes, especially sectional title flats, have been valued higher than the comparative market price. Transfer duty is calculated at a rate of 5% on properties with a value of between R500 000 and R1 million, and at 8% on the value exceeding R1 million. In the case of properties sold for under R500 000, but with a municipal value of, for example R700 000, a buyer will now be liable for transfer duty of R10 000, whereas he would not be liable for transfer duty on the selling price alone. Similarly, in the case of a property that was sold for R900 000, but with a municipal value of R1,1 million, the buyer would be liable for an additional transfer duty of R13 000.
'In our view,' said Clarke, 'certain sectional title apartments are now over-valued, probably because this was the first time that these properties were valued individually'
On the other hand, he said, where the valuation is below the asking price, property buyers should be warned that municipal valuations are often not market related. Many buyers could now be tempted to use the municipal valuation as an indication of market value but this would be a mistake, says Clarke.
'On any property sale,' he said, 'a really professional agent should do a comparative market analysis '“ and both the seller and the buyer should insist on seeing this because there is no better way of accurately assessing the current market value of a home'
Clarke said that the Receiver of Revenue is likely to insist on a comparative market analysis if he suspects that the sales price is below what could have been achieved. This can complicate matters when, for example, a property is transferred to a friend or family member at a knockdown price.
