How much does it really cost to own a property these days? Beyond bond repayments, maintenance, and insurance, municipal charges are taking an increasingly large bite out of household budgets. In some South African metros, homeowners are paying over R3,000 more per month than they would have if their combined municipal costs had kept pace with inflation over the past 20 years.
And when the cost of owning a property rises, the effects don't stop with homeowners. As potential real estate clients become more conscious of their budgets, it can influence what they can afford, where they're willing to buy or rent, and whether they decide to move at all.
The rise in rates and taxes largely comes down to a fundamental shift in how municipalities bill for their services. Back in 2006, household municipal bills were generally more closely tied to service consumption. Today, homeowners in some metros face fixed network and service-access charges, even before accounting for how much of a service they use.
Steep, above-inflation increases in Eskom's bulk tariffs have also made electricity one of the largest ongoing expenses on a municipal bill.
Business and industry groups say that this creates a frustrating dynamic in which residents pay significantly more for increasingly unreliable services, often having to fund private security, road repairs, or local improvement districts themselves just to maintain basic infrastructure. Critics such as Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (OUTA), also argue that financial mismanagement, uncollected debt, and distribution losses are contributing to the problem, leaving compliant ratepayers to shoulder the costs.
Property practitioners are seeing these financial realities play out directly in their daily pipelines. In a recent Prop Data poll, a staggering 90.3% of respondents confirmed that soaring municipal costs are actively affecting their business.
“Rising municipal costs become another factor in whether a transaction succeeds or stalls,” says Anne Lütge, COO of Prop Data. “When running costs outpace general inflation so drastically, buyer affordability drops across every sector. Property practitioners are having to adapt quickly, guiding clients through the total long-term cost of ownership rather than just the purchase price.”
For some practitioners in the commercial and industrial property market, this is keenly felt where municipal charges can significantly affect operating costs and returns. “As industrial and logistics brokers focusing on Hammarsdale and Cato Ridge, our biggest deterrent to sales is the rates randage,” says Robert McInerney, Principal and Broker at Share-List Property. “At 4.8547c/R plus extra for the Special Rating Area (SRA), clients are paying over 5% of the value of their property per year on rates. In some cases, rates are as much as 40% of the rental income.”
When asked how rising municipal costs are affecting their businesses, 46.6% of respondents to the Prop Data poll pointed to reduced buyer affordability. A further 19.8% said properties were becoming harder to sell, while 14.5% reported that buyers were becoming more cautious.
“When municipal charges take up a bigger share of a household's monthly budget, buyers have less room to manoeuvre,” notes Lütge. “They may need to lower their price range, reconsider the type of property they're looking for, or put their plans on hold altogether. That naturally affects the pool of buyers practitioners can work with.”
For brokers on the ground, the drop in purchasing power hits the bottom line quickly. “Less affordability translates to fewer sales, less development, and ultimately less job creation,” says McInerney. “As practitioners, it means less income and more time wastage.”
“This is where property practitioners should take a proactive advisory approach,” says Lütge. “Clients need more than to be shown a property but also get honest, upfront guidance on total monthly running costs so they don't hit a wall halfway through the transaction.”
“It also changes the conversation practitioners need to have with sellers. If a home carries disproportionately high municipal tariffs, sellers need to understand that buyers will factor that directly into their offer price,” she adds.