A significant number of Cape Town property owners eligible for relief remain unaware of their status or have neglected to apply for reclassification following a change in their personal circumstances. According to Steer & Co, a leading property management and brokerage firm, the classification of properties—ranging from residential to industrial and commercial—directly impacts how the City levies rates.
With 18 distinct categories, each carrying its own rate, many property owners may be unaware of their potential overpayments due to misclassification. The residential rate is proposed at 0.006428 cents in the rand for 2026/27, while the business and commercial rate is 0.015106, more than double. On a property valued at R3 million, this gap translates to roughly R25 434 a year.
Short-Term Letting and Property Classification
Short-term letting is a common example where the lines blur, and owners can sit in the wrong category for years without realising it. The City of Cape Town’s draft rates policy for 2026/27 includes a specific threshold: if a property’s short-term letting availability exceeds 50% of total annual room nights, the Municipal Valuer may classify it as business and commercial rather than residential.
As noted by the City of Cape Town, property owners should review their classification annually when the City publishes its budget and rates policy. This is an opportunity to look at one’s property with fresh eyes and ask important questions, such as whether the current classification is accurate.
Potential Relief for Property Owners
In April, the Western Cape High Court ruled against the City of Cape Town’s fixed tariff structure, declaring fixed charges linked to property values, such as cleaning, water and sanitation, unlawful. As Western Cape Government officials consider the implications of this ruling, property owners may see some relief in the coming months.
The following are key points to consider for property owners in Cape Town:
- Review your property classification annually to ensure accuracy.
- Understand the City’s draft rates policy and how it may impact your property.
- Be aware of the 50% threshold for short-term letting and its potential impact on your property classification.
By staying informed and taking proactive steps, property owners in Cape Town can potentially avoid overpayments and ensure they are classified correctly.
