20 June 2021

Rising house prices and your rates

From the week's Eastern Herald:

Again this week I have read that spiralling house prices will mean that your council rates will spiral as well. Most responsible councils first make a decision about how much money they need to provide the projects that their community wants and then set the rate in the dollar to achieve this. If nearly all house prices have risen 5% in your city in the last 12 months and your council needs a 5% rate rise to achieve the above your rates will go up 5% with no rate in the dollar change. If, however, your council wants to raise the rates by only 2.25% then the rate in the dollar is reduced so that this is the amount you pay. If, however, your valuation has gone up by more than the average you will still pay more and if it has risen less you will pay less. The current dilemma facing Unley is that while house prices have gone up, commercial values have gone down. As a separate rate is set for these properties then achieving an equitable increase for these is not easy. It easy to tell a ratepayer that your rates are up because council must cover even small inflation changes, but a little more difficult to tell a shopkeeper, to whom the landlord has passed on the bill, that the rent is the same (not council’s fault as this will be consistent with the lease agreement) but your rates will increase by way more than the agreed amount. When setting the value of commercial properties the Valuer General relies on income potential by traders sharing this information with them. We hear the argument that why should we worry as it is the landlords that pay when we know they pass the bill directly to their tenants. However, at least one council tells its ratepayers that keeping the rate in the dollar the same is equivalent to there not being a rate rise which as housing prices continue to rise simply isn’t true! Responsible councils lower the rate in the dollar to achieve an agreed rate. These are my personal views and are not necessarily council policy.

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