Rising municipal rates could price property owners out of South Africa’s cities

Every municipal budget is more than just revenue and expenditure, but about who can absorb the rising costs and who cannot.

The South African Institute of Black Property Practitioners (SAIBPP) says the annual budget debate usually focuses on whether tariff increases are above inflation, whether a city is “well run,” or whether residents are getting value for money.

“These are legitimate questions, but they avoid a harder question:

When municipalities raise rates and tariffs, who pays the price?” 

This question is not abstract, says Kululwa Muthwa, the CEO at SAIBPP. 

She says it is the lived reality of their members, because municipal increases do not land equally.

“A 5% increase means one thing to a diversified property fund with hundreds of assets. It means something entirely different to a black landlord with three buildings in Umlazi, Soshanguve, Mdantsane or the Johannesburg inner city, carrying higher financing costs and thinner margins in an economy that is barely growing.The percentage may be the same. The impact is not.”

The picture painted by numbers across five cities

The 2026/27 budget cycle reveals a pattern across South African cities, SAIBPP says. 

The organisation which promotes transformation, investment, and opportunities within the South African property sector says the City of Cape Town has proposed a 10.21% reduction in its residential rate in the rand formula, a move the Mayor Geordin Hill-Lewis described as providing relief to over 60% of homeowners.

It says the numbers behind that headline, however, tell a more complex story.

“Cape Town's total rated property value has grown by 16.65% between the 2022 and 2025 general valuation rolls, from R1.85 trillion to R2.16 trillion. Despite the rate in rand reduction, the City is projected to collect R963.5 million more in property rates revenue in 2026/27 than in the previous year.

A lower formula does not automatically translate to a lower bill

SAIBPP says eThekwini has proposed a 5% increase across all valuation roll tariffs for 2026/27. Nelson Mandela Bay is at 5.5%, Polokwane at 4.7% and Greater Tzaneen, 5.62%.

It says these numbers, taken in isolation, appear manageable. “Against the backdrop of South Africa's current economic pressures, unemployment above 30%, inflation that has persistently outstripped wage growth, and interest rates that remain elevated, they are anything but. And these increases arrive alongside electricity hikes, water increases, sanitation charges and rising borrowing costs.

In Johannesburg, residents face a combination of these and a city that battles infrastructure collapse, water losses, electricity outages and declining service reliability. The concern is not only affordability. It is legitimacy. Citizens are being asked to pay more while often receiving less.That is the defining municipal tension in South Africa today.

Residents are paying first-world prices for third-world reliability

SA’s property sector is not a level playing field.

According to Muthwa, the burden is not shared equally because SA’s property sector is not a level playing field. She adds that it has never been.

“Black property practitioners operate in a market that was designed to exclude them and has been slow to correct that design. When municipalities increase rates uniformly across the board, they assume all property participants have equal resilience."

"They do not. A black-owned property business with limited access to capital experiences municipal inflation very differently from a large institutional fund with balance-sheet depth, cheaper finance and diversified income streams.In an unequal market, uniform increases do not produce neutral outcomes. They deepen inequality.” 

The CEO says less than 10% of JSE-listed REITs are black-originated funds. She adds that less than 5% of government’s leased property portfolio is sourced from black landlords despite the state representing one of the country’s largest property tenants.

“Black Africans, despite being the overwhelming majority of the population, still own only a fraction of privately held land and commercial property assets.

“These are not historical footnotes. They are the architecture of the present and every municipal budget cycle operates within this architecture. Every tariff increase lands differently depending on where you stand within it.” 

According to SAIBPP, there is a dimension of the municipal budget debate that receives almost no attention: the property market in historically black areas. 

The organisation says townships and inner-city precincts, that predominantly serve black communities, remain trapped in a contradictory system. It says banks continue to regard township property development as high risk. Credit assessment systems persist in treating historically black areas as economically marginal, regardless of the actual demand and activity in these markets, it adds. 

It says municipalities value and tax these properties as appreciating economic assets, whilst the financial sector still treats them as high-risk and marginal.

In effect:Township property owners are taxed like participants in a mature market but financed like participants in a risky informal economy, SAIBPP says. 

“This contradiction suppresses investment, limits development and entrenches spatial inequality. The municipal budget conversation does not address this reality sufficiently. This dynamic must be named and it must be part of the municipal budget conversation.”

Calls for a municipal fiscal framework that is conscious of its distributional consequences

The organisation says it is not opposed to municipalities collecting revenue. They say they understand that functioning cities require funding, and that funding requires rates.

“What we are calling for is a municipal fiscal framework that is conscious of its distributional consequences, one that does not simply manage revenue aggregates, but examines who is paying, what they can afford to pay, and whether the services they receive in return reflect the contribution they are making.” 

Specifically, SAIBPP calls for:

•Municipalities must introduce differentiated assessment frameworks that distinguish between the financial capacity of large institutional property owners and that of small and emerging property businesses. A single tariff applied uniformly across a deeply unequal sector does not produce equitable outcomes.

•The state leases a significant portion of its accommodation from private landlords, at a cost to the national fiscus of billions of rands per year. Less than 5% of that portfolio is leased from black landlords. If the government is serious about transformation in the property sector, procurement decisions are the most direct lever available to it.

•Municipal valuation processes must be transparent and accessible to all property owners. Too many black property owners, particularly in townships and secondary cities, lack the institutional knowledge or professional support to challenge valuations that may be inaccurate or excessive. The process must be made genuinely accessible, not merely theoretically available.

It adds that a municipality cannot simultaneously serve its residents and extract from them at a rate that outpaces their economic growth. “Municipalities with high concentrations of historically disadvantaged residents must be adequately supported by national government to deliver services without placing the full burden of their fiscal constraints on the same communities.”

What municipal fiscal policy means for the transformation of property ownership

According to Muthwa, SA has a sophisticated property sector. She says it has a capable regulatory framework, a functioning market, and a generation of black property practitioners who have built careers and businesses despite structural disadvantage. 

“What it does not yet have is an honest national conversation about what municipal fiscal policy means for the transformation of property ownership.

“The annual budget cycle is one of the most powerful instruments of economic policy in local government. How municipalities value property, how they set tariffs, how they allocate capital, and how they manage their own property portfolios either advances or retards transformation. That is not a rhetorical claim. It is a structural reality.

Beneath every municipal increase lies this question:

Are our cities pricing people into opportunity, or pricing them out of it?” 

Earlier this month, the South African Institute of Valuers(SAIV) said the implementation of the General Valuation Roll (GVR), in terms of the Local Government: Municipal Property Rates Act, No. 6 of 2004 at the beginning of July marks a key milestone in the municipal property rating cycle, with a number of municipalities set to be influenced by this process in their respective areas. 

SAIV said this is not merely an administrative update, but the foundation on which municipal property rates are determined. 

The Institute dedicated to serving, advancing, and protecting the valuation profession said valuations are based on market value at a specific date, ensuring a fair and transparent distribution of the rates burden across all properties. It added that without a credible GVR, the equitable and consistent application of rates would not be possible, with direct implications for service delivery and local governance. “As this milestone approaches, we encourage property owners to familiarise themselves with the process. We believe that informed property owners are better positioned to ensure fairness.”