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Monday Aug 27, 2012

How property valuations work

What is it that makes one residential property worth more than another? Is it the number of bedrooms, size of the garden, or additional entertainment features? Or is it something else entirely?

These questions are always asked when the contentious issue of property valuations is raised, and every four years - when the new valuations are made - thousands of people lodge objections, often comparing their homes to others in their street or neighbourhood, and asking why their homes are worth more or less.

But, as Willy Govender, the director for mass appraisals at Durban valuation company eValuations, explains, the issue is complex.

"For residential properties, the most important criteria are normally the size of the property and the total living area, which is made up of the total size in area of the living areas, bedrooms, bathrooms, kitchen, toilets, etc."

Excluded from the total living area would be open verandas and patios.

In terms of other improvements garages, granny flats, domestic quarters and carports were also taken into account.

"If the property has a pool, this is factored in. Other areas such as entertainment areas, braai areas and gazebos are considered less important, unless they are enclosed," Govender said.

Neighbourhoods or suburbs played a significant role and this determination was based on sales of properties in areas.

Sales reflected the characteristics of an area, such as security and nearby schools or amenities, so indirectly these played a part in property values.

"Next, and equally important, is the quality of the buildings and their actual condition," Govender explained.

"In certain areas, factors such as view, external noise and security are also considered.

"View is classified and valued higher if the properties have sea, partial sea or panoramic views. Alternatively, in cases where there are informal settlements or industrial areas, these would impact negatively."

Property topography is also factored in, based on its being a level, average slope or steep site. Security is classified as high, medium or low.

"High would be properties with high walls, electric fences, electronic gates etc. Medium would be properties with some walls and gates," he said.

In the case of vacant land, the zoning was taken into account.

Govender emphasised that it was important to understand these factors applied to mass valuations and equity needed to be considered, especially as the property values were used to determine rates and taxes.

"In the case of the property inspections, only in about 20 percent of the cases do homeowners provide full access to the properties.

"So, internal finishes of the property are not considered for the valuations for rating purposes.

"These would include the type of kitchen, flooring finishes, sanitaryware, lighting, ceilings and other internal finishes."

Although this might be questioned by homeowners as they were aspects which did contribute to property value, Govender said they could not be considered for consistency purposes, as not all properties could be entered, resulting in those properties which were entered being prejudiced.

The Mercury


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