Municipal rates increases: How they're impacting property owners in 2025
Category Newsletter: Article
In 2025, property owners across South Africa-particularly in major metropolitan areas like Cape Town-are facing significant financial pressure due to steep municipal rates increases. While annual property rate adjustments are not uncommon, the scale and structure of this year's changes have sparked widespread concern among homeowners, investors, and real estate professionals.
Substantial Rate Hikes in Cape Town
The City of Cape Town's 2025/26 draft budget proposes an average increase of 7.96% in property rates. However, due to a recent general property valuation roll and new fixed charges that are linked to property value rather than actual consumption, many residents-especially in high-value areas-are seeing their monthly municipal accounts rise by 20% to 30%, and in some cases, even more.
These increases are particularly pronounced in affluent suburbs such as the Atlantic Seaboard, Oranjezicht, and parts of the Southern Suburbs. Many of these properties are low-usage, high-value homes, which are now being subjected to disproportionately high fixed service charges. In response, residents and ratepayer associations have criticised the city's approach, arguing that linking fixed municipal charges to property values rather than actual usage unfairly penalises certain segments of the population, including pensioners and long-term owners.
Pushback and City Response
The public backlash has led to some adjustments in the budget. The City of Cape Town has expanded the rates rebate threshold to include all properties valued at R7 million or less, improved pensioner relief measures, and lowered cleaning charges for properties under R20 million. In addition, fixed water tariffs have been slightly reduced from the original proposal.
City officials maintain that these changes will protect the majority of residents. According to the mayoral committee, approximately 97% of ratepayers will see increases of less than 20%, with only a small minority facing increases beyond that threshold-primarily due to unique property characteristics or underutilisation.
Broader Implications for Investors and Landlords
Commercial property owners are also facing challenges. With municipal rates increasing faster than inflation and rental income in many cases, investors are seeing a direct impact on their net operating income (NOI). These increased costs are affecting property valuations and, by extension, loan-to-value ratios, which may have implications for financing and refinancing arrangements.
In addition, the process of selling property has become more financially demanding. Municipalities are requiring clearance figures to be paid months in advance, putting additional pressure on sellers. Financial service providers, such as those offering bridging finance, are seeing increased demand as owners look for ways to manage this short-term liquidity constraint.
Experts recommend that commercial landlords revisit lease structures to ensure that municipal charges are fairly passed on to tenants where appropriate. Others are choosing to pivot towards more cost-efficient buildings with lower municipal exposure or investing in energy- and water-saving technologies to offset escalating service costs.
National and Global Context
This trend is not limited to Cape Town or South Africa. Around the world, municipalities are increasingly reliant on property rates to fund ageing infrastructure and expanding service delivery needs. Cities in Australia, for example, have implemented rate increases of between 6% and 15% in 2025, prompting similar concerns from residents and business owners.
The common theme is that local governments are facing significant budgetary pressures, and property owners are becoming the default source of additional revenue. With inflation still affecting municipal operating costs and service delivery expectations rising, further increases may be inevitable in the years ahead.
Navigating the New Landscape
For property owners, careful financial planning is essential. Reviewing municipal property valuations and lodging objections where appropriate can provide some relief. Participation in public budgeting processes and staying informed about local council developments are also crucial.
Furthermore, homeowners and investors should consider energy-efficient retrofitting, borehole water systems, and solar power installations to mitigate service-based charges. Legal advice may also be beneficial for those looking to challenge rate hikes or reassess ownership structures for tax or financial efficiency.
The 2025 municipal rates increases are having a tangible impact on South African property owners, reshaping financial realities and prompting widespread debate. While municipalities justify the hikes as necessary for long-term sustainability, many property owners view the changes as disproportionate and financially burdensome. Navigating this evolving environment will require strategic planning, informed engagement, and proactive property management.
Author: Coastal Property Group
