Durban residents pay more in property rates

Moneyweb analysis of property rates in the five largest metropolitan municipalities – Johannesburg, Ekurhuleni, Tshwane, Cape Town and eThekwini – reveals stark differences in the amounts levied to residential households.

Homeowners in eThekwini pay the most, with monthly property rates charges as much as 117% more than in
Johannesburg, and 174% more than in Cape Town (at a property value of R1 million).

Even at a property value of R3 million, eThekwini rates are more than double those of Cape Town and nearly 70% higher than Joburg’s. Cape Town’s residential rates are the lowest out of the five metros, while Joburg’s are also reasonable in comparison, especially at the lower end of property values – given the generous (by comparison) R350 000 exemption.

Property rates in Ekurhuleni and Tshwane are very similar and significantly higher than in Joburg and Cape Town, but still also substantially lower than eThekwini’s.

Municipalities calculate the rates using a charge based on a number of cents in the rand. This value (which can be at a lower or higher ratio or amount, depending on the type of property) is multiplied by the value of the property, as per its most recent municipal valuation.

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This provides a strong incentive for municipalities to regularly update their valuation rolls and to arguably ensure that these values are as close to achievable/bank valuations as possible (historically, municipal values were always lower than those of banks/prices achievable in the market).

The number of cents in the rand multiplied by the property value gives a charge for the year. Any exemptions are then factored in, providing a net charge for the year which is then divided by 12 to get a monthly amount. VAT cannot be levied on this as it is effectively a property tax. By regulation, charging rates on the first R15 000 of property value is “impermissible” (due to an outdated “statutory reduction”), but most metros simply roll this into an
“exempted amount”.

Some include separate exemptions. In Joburg, the first R350 000 of a property’s value is exempt. In Cape Town this figure is R300 000, while the value is R150 000 in Ekurhuleni and Tshwane and R120 000 in eThekwini. These figures include the R15 000 statutory exemption and are sometimes only applied when the value of a property exceeds a certain amount.

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Owners of lower-value properties and those occupied by pensioners (generally under a certain value) can apply for a rebate on rates charges. This analysis also includes refuse removal – for one 240-litre bin or bags, depending – as
some municipalities (specifically Joburg in this comparison) now charge based on the value of a property. Some, like eThekwini, charge a flat fee but offer automatic rebates for lower value properties.

The decision to charge based on property value in Johannesburg drew a fair amount of criticism when this was announced as the underlying cost to remove a bin from a house valued at R1 million and a bin at a house valued at R5 million ought to be the same.

This tariff model could be described as “redistributive” as wealthier residents are effectively subsidising refuse removal (and possibly other services) for lower-income residents.