Property prices in Joburg are much lower than those in Durban

A Moneyweb analysis of property rates in South Africa’s five largest metropolitan municipalities, namely Johannesburg, Ekurhuleni, Tshwane, Cape Town and eThekwini, reveals stark differences in the amounts levied on residential households.

Homeowners in eThekwini (Durban) pay the most of the five metros, with monthly property rates up to 117% more than in Johannesburg and 174% more than in Cape Town (for a land value of R1 million).

Read: The revolt of the taxpayers

Even at a higher property value of R3 million – where the exempt amount has less impact – eThekwini rates are more than double those in Cape Town and almost 70% higher than those in Joburg.

Cape Town’s residential rates are the lowest of the five metros, while those in the city of Joburg are also reasonable by comparison, especially at the lower end of land values ​​given the generous exemption (by comparison) of 350,000 rands.

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

How rates are determined

Municipalities calculate land prices using a charge 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.

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, so these rates always exclude VAT.

For example, a hypothetical municipality with a residential tariff charge of 0.01c rand (and an exemption on the first 250,000 rand in value) would calculate tariffs on a 1 million rand property as follows:

  • Fee: 0.01cx R1 million = R10,000
  • Exemption: 0.01cx R250,000 = (R2,500)
  • Fees charged per year: R7,500
  • Rates charged per month: R625

Rates per month

Cents in the rand Property R1m Property R2m Property R3m
eThekwini 0.013152 R964 R2,060 R5 348
Ekurhuleni 0.01052 R745 R1,622 R4 252
Tshwane 0.0144 R740 R1,610 R4 220
Johannesburg 0.00822 R445 R1 130 R3 185
The cap 0.00603 R352 R854 R2 362

According to 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 roll this into an ‘exempt amount’ “. Some include separate exemptions.

In Joburg the first R350,000 of a property’s value is exempt, in Cape Town this is R300,000, while the value is R150,000 in both Ekurhuleni and Tshwane. In eThekwini, only the first R120,000 is exempt.

These figures all include the R15,000 statutory exemption and are sometimes only applied when the value of a good exceeds a certain amount.

Owners of property of lesser value and those occupied by retirees (generally below a certain value) can claim a rebate on charges.

Refuse removal

This analysis also includes garbage removal – for a bin or 240 liter bags, depending – because some municipalities (especially Joburg in this comparison) now charge according to the value of a property, compared to a flat rate . 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.

The city of Joburg also tried to introduce a controversial recycling fee of R50 per month “for all properties with a market value above R350,000” last year, which made little sense because the city’s army of informal waste pickers already collect all recyclable materials. valuable.

Following strong resistance from taxpayers, this proposal was dropped.

Read: COJ’s R50 per month recycling fee is nonsense

Garbage removal costs according to the value of the property

1 million rand 2 million rand 3 million rand
Johannesburg R245.00 R360.00 R384.00
Tshwane R315.02 R315.02 R315.02
eThekwini R173.04 R214.43 R214.43
Ekurhuleni R186.62 R186.62 R186.62
The cap R142.00 R142.00 R142.00

* All excluding VAT (VAT is levied on these charges)

At a lower property value, Tshwane’s charge for rubbish removal (R315.02) is highest due to the fixed nature of the charge (and no discount).

Cape Town’s flat rate of R142 is by far the cheapest.

At higher property values ​​(R3 million in this analysis), Cape Town accounts for less than half of the amounts charged to Tshwane and Joburg.

Ekurhuleni’s flat rate fare of R186.62 is reasonable compared to those charged in other metros.

It is important to note that fares are only a levy on landlords to maintain a multitude of services provided (in theory) by the city/metro (this is also the case for rubbish removal as well as other services, such as sewage).

Although municipalities generally manage different divisions separately and with their own budgets, some services are “loss-making” and subsidized by others.

Some services are paid for through transfers and grant revenue, mainly from the fair share of the national budget. There are smaller grants under various government programs and departments (the expanded program of public works, public transport, health, etc.) which are also used to fund various services.

However, more and more municipalities have started to use electricity supply (given the high tariffs), as well as water supply to subsidize other services.

Municipalities want a slice of Eskom’s distribution pie
How much electricity R1k, R2k will buy you in SA’s largest metros

Listen to Suren Naidoo’s interview with Neil Gopal, CEO of Sapoa (or read the highlights of the interview here):