Paragon Finance Warns: Crushing Municipal Rate Hikes Threaten Commercial Property ROI
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Over the past decade, municipal rates and taxes in South Africa have significantly outpaced inflation with income from property rates surging by 174%, compared to a 72% increase in the Consumer Price Index (CPI) from 2010 to 2021[1].
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On average, property rates grew at an average annual rate of 6.6%, surpassing CPI’s 4,8%, with increases in major metros ranging from 6% in Cape Town, 48% in Johannesburg and 32.1% in eThekwini (Durban)[2].
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This surge is linked to infrastructure demands, poor revenue collection, and increasing reliance on property-based income.
19 June 2025: South African property owners face a complex landscape of rising rates and taxes, alongside evolving market dynamics and strategic shifts across sectors. Understanding these factors is crucial for investors, homeowners, and lenders alike.
In Johannesburg, property rates and taxes have outpaced both property price growth and CPI inflation over the past five years, increasing the real cost pressure on residential and commercial property owners. In contrast, Durban’s are in line with inflation while Cape Town’s rate increases, although minimal until now, are set to skyrocket with both rates and fixed charges being linked to property values. This means the actual municipal tax burden relative to inflation and property value growth varies significantly by city, with Johannesburg property owners facing the greatest squeeze.
According to Stats SA, property rates recorded an average annual growth rate of 6.8% from 2009 to 2024 across 39 municipalities, more than doubling in the last 15 years, with inflation increasing by an average of 5.1% per year over the same period. Residents in some municipalities have been harder hit than others, with some facing massive increases in values, and in turn, property rate hikes due to discrepancies and questionable valuations.
“Understanding how property rates and taxes have changed relative to South Africa’s Consumer Price Index (CPI) inflation provides key insights into the real burden on property owners in the country’s major metros,” explains Gary Palmer, Founder and CEO of Paragon Finance.
Property rates for Johannesburg and Durban municipalities are currently based on a statutory calculation known as the cent-in-rand tariff (the rate a person would pay for each rand of property worth is indicated by the formula) applied to the market value of the property, without a separate fixed charge component.
Cape Town, in contrast, has adopted fixed charges tied to property values as part of its rates and taxes structure, meaning that property owners will pay a fixed monthly or annual fee based on the value of their property, in addition to the cent-in-the-Rand tariff. While this approach aims to make
the rates system more equitable and transparent, it has been particularly controversial due to the increased burden on higher-valued properties.
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