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Which Municipality’s Homeowners Pay The Highest Rates?

Author: Megan Ellis
Date: 2017-06-30
Property rates play a significant role in a city’s cost of living. So which of South Africa’s four major metros charges residents the most?
The cost of living in a city is not only based on the price of food or transport. In fact, for property owners, rates are a significant cost to take into consideration. But why do municipalities charge rates? And which of our four major metros charges the most for residential property?

Why Do We Have To Pay Rates?

Property rates are a significant source of income for municipalities to fund services such as refuse collection and infrastructure maintenance. Municipalities were given powers to charge these rates through the Municipal Property Rates Act.  The Act provides basic guidelines to follow along with a legal framework. Each municipality, however, determines their rates - which is why there can be significant differences in various regions. Rates are calculated based on the value of your property, along with the rate for your property type. We took a look at residential rates - the property type that affects most landowners in the country. The value of your home is determined by the municipality, with owners having the opportunity to contest the valuation if it is seen as too high. The rates themselves are measured in "cents in the rand", also referred to as "Randage". This is essentially how much you pay per Rand of your property's value in monthly rates. For example, if your house is worth R1-million, and the Randage of residential property rates is R0.005, your total rates for the year will be R5 000. You can calculate this figure by multiplying the value of your property by the rate amount.
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How Do Rates Differ Across Municipalities?

We took a look at the different residential property rates charged by South Africa's four major metropolitan areas. So which charged the most - Johannesburg, Pretoria, Durban or Cape Town? One common thread in all their rates calculations is that rates do not apply to the first R15 000 on your property's value. This is stated in the Municipal Property Rates Act. Most municipalities go beyond this and do not charge rates on the first R200 000 of your home's value. This means that you must subtract R200 000 from the value of your home, then calculate the rates, to see how much you need to pay. You can take a look at the rates in different municipalities below:
Municipality Residential Property Rate
City of Johannesburg R0.006161
City of Cape Town R0.006397
eThekwini Municipality R0.001060
Tshwane Municipality R0.01094
  As you can see in the table, Tshwane Municipality charges the highest rates for residential properties out of the four metros. Cape Town is the second most expensive in terms of these rates, followed by Johannesburg and eThekwini. Each municipality also gives rebates for properties of a certain value, as outlined in the rate guidelines and budgets. You can also get rebates if you are part of a vulnerable population. Examples of these are indigent or child-headed households. The table below shows the general residential rebates (for all population groups) for each municipality below:
Municipality Rebates
City of Johannesburg No rate on first part of value up to R200 000
City of Cape Town No rate on first part of value up to R200 000
eThekwini Municipality No rate on first part of value up to R105 000 for properties valued at over R230 000.
Tshwane Municipality No rate on first part of value up to R120 000

What Does This Mean For Me?

If you're hoping to buy a home in a certain municipality, you will have to take a look at the rates and rebates to see the extra costs of buying a property. Just because a city has a high rate doesn't mean you'll be paying more than people in another metro. Take, for example, Cape Town. You will be charged a lower rate than Pretoria - but you'll often find Cape Town properties are far more expensive. Since the value of your home plays a role in your rate, this could mean you end up paying much more than the average Pretoria homeowner.

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