Durban residents pay more in mortgage rates — The Citizen



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 on residential households.

eThekwini owners pay the most, with monthly mortgage rate charges up to 117% more than in
Johannesburg, and 174% more than in Cape Town (for a land value of 1 million rand).

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

Ownership rates in Ekurhuleni and Tshwane are very similar and significantly higher than in Joburg and Cape Town, but still significantly lower than in eThekwini.

Municipalities calculate tariffs using a fee based on a number of rand cents. This value (which may be at a lower or higher ratio or amount, depending on the type of property) is multiplied by the value of the property, according to its most recent municipal assessment.

ALSO READ: Real estate market is recovering, but no easy sailing ahead – report

This is a strong incentive for municipalities to regularly update their valuation rolls and ensure that these values ​​are as close to achievable/bankable valuations as possible (historically municipal values ​​were always lower than banks/achievable prices on the market).

The number of rand cents multiplied by the value of the property gives a charge for the year. All exemptions are then taken into account, providing a net charge for the year which is then divided by 12 to obtain a monthly amount. VAT cannot be levied as it is actually a property tax. According to the regulations, charging rates on the first R15,000 of the property’s value are ‘inadmissible’ (due to an outdated ‘statutory reduction’), but most metros simply incorporate this into a
“exempt amount”.

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

READ ALSO: The ups and downs of the residential real estate market

Owners of property of lesser value and those occupied by retirees (generally below a certain value) can claim a rebate on charges. This analysis also includes garbage removal – for a bin or 240 liter bags, depending on
some municipalities (especially Joburg in this comparison) now charge according to the value of a property. Some, like eThekwini, charge a flat fee but offer automatic discounts for lower value properties.

The decision to charge by property value in Johannesburg drew widespread criticism when it was announced, as the underlying cost of removing a bin from a house worth R1million and a tray in a house worth 5 million rand should be the same. .

This pricing model could be described as “redistributive”, as wealthier residents actually subsidize garbage removal (and possibly other services) for lower-income residents.