When Fixed Costs Rise, Strategy Matters: What Cape Town's 2025/26 Budget Means for Property Owners

The City of Cape Town's Budget for 2025/26 is more than a financial roadmap. It's a signal to property owners, trustees, and investors that cost dynamics are shifting.

With a proposed R84.1 billion in spend and several tariff adjustments having taken effect from 1 July 2025, the emphasis is clear: infrastructure expansion, safety investment, and service delivery. But the practical reality for many is this. Municipal charges are rising, and the way they're applied is fundamentally changing.

What's Changing?

The most immediate impact for property stakeholders comes in the form of value-based fixed charges. For the first time, monthly charges for water, sanitation, refuse removal, and a new city-wide cleaning tariff will be linked directly to property value brackets.

In simple terms:

Higher-value properties will pay more in fixed monthly charges, regardless of usage.

This is a notable shift from consumption-based billing, and one that affects owners, tenants, and trustees across Cape Town's residential and commercial property landscape.

Additional headline changes include:

• A 7.96% increase in property rates
   
• A new cleaning tariff, rolled out city-wide
   
• Targeted rebates for pensioners and indigent households
   
• Continued efforts to enhance safety through metro police investment

Why this Matters for Property Professionals

For landlords, managing agents, and body corporates, the move to value-based billing presents both a financial challenge and a planning opportunity. These changes require proactive budgeting, transparent tenant communication, and potentially revised lease models to accommodate the added costs.

At Steer & Co, we're already advising clients to:

• Adjust levy forecasts and reserve planning to reflect new tariff bands
   
• Communicate clearly with tenants ahead of any changes
   
• Review service contracts and utility recovery models within community schemes
   
• Use the budget window to build trust and transparency, not just recoup costs

It is no longer enough to budget based on usage alone. Fixed charges now require strategic forecasting and operational agility, especially for trustees and portfolio managers.

The Bigger Picture: Equitable or Elastic?

The City argues that value-based charges will promote equity by easing the burden on lower-income households. But for high-value properties, often sectional title units or investment portfolios, the result is simply HIGHER fixed expenses, regardless of tenant load or resource efficiency.

As a result, we're likely to see:

• Landlords reassessing tenant charges and the timing of such increases
   
• Trustees conducting mid-year levy reviews
   
• Sectional title schemes absorbing or reallocating shared costs

The underlying principle of "paying for potential usage" creates a new normal. It requires thoughtful adaptation from all sides of the rental and ownership ecosystem.

How Steer & Co Is Supporting Clients

With over 140 years of local property management experience, Steer & Co has guided clients through countless budget cycles. Our approach to this year's changes is simple:

• We provide clear breakdowns of expected increases
   
• We help body corporates stress-test their budgets
   
• We work closely with trustees to reframe levy communication
   
• We support landlords in revising lease structures where appropriate

The City's changes are not optional. How you respond to them can be strategic.

Final Thought

The shift to value-based charges may be driven by municipal necessity, but it's property professionals who will feel it first.

Whether you're a trustee navigating community scheme costs or a private landlord with multiple units, now is the time to prepare. Transparency, forecasting, and tenant communication will define your success in this next chapter.

If you'd like support in reviewing your portfolio's exposure or planning for the transition, our team is here to assist.