Buying, owning and selling property in South Africa involves more than just paying the purchase price and repaying the home loan. Many taxes apply at different stages of property ownership, and understanding them can help buyers budget appropriately and avoid unexpected costs.
From transfer fees when buying a home to municipal rates and capital gains tax when selling, property taxes form a significant part of the total cost of owning real estate.
According to Adrian Grove, Founder and CEO of MyProperty, many buyers focus only on the purchase price of the property and ignore the broader financial picture. He says, “Buying a home is one of the biggest financial decisions for most people, but the purchase price is only one part of the equation. Taxes and municipal fees can significantly impact the true cost of ownership.”
Understanding how these taxes work can help buyers and home owners make more informed decisions when entering the property market.
municipal property rates
Municipal property rates are ongoing taxes paid by property owners to local municipalities. These funds contribute to public infrastructure, roads, public spaces and municipal services.
Rates are calculated based on the municipal assessment of the property and are usually billed monthly along with service charges such as electricity, water, sanitation and garbage removal. In many municipalities, service charges and utility charges make up a large portion of the monthly bill, and these costs have often increased faster than inflation in recent years.
Homeowners should also be aware that municipalities update their assessment rolls regularly. These assessments determine how much a homeowner pays in property rates. If a homeowner feels that the value of their property has been overstated, they have the right to object during the assessment roll process.
transfer fee
Transfer fee is a tax payable when ownership of a property is transferred from the seller to the buyer. The tax is paid to the South African Revenue Service (SARS) and is usually handled by a conveyancing lawyer during the transfer process.
Transfer fees are calculated on a sliding scale. Properties worth less than R1.21m are currently exempt from transfer fees. Once the value exceeds this limit, tax becomes payable as per the progressive tax brackets.
However, buyers should remember that transfer fees are only a part of the total transfer cost. “Buyers often budget for deposits and bond repayments but forget about the additional costs involved in transferring the property,” says Grove. “Transfer fees, legal fees and administrative costs can add a significant amount to upfront expenses.”
If the property is sold by a VAT-registered developer, transfer fees do not apply. Instead, value added tax (VAT) is included in the purchase price.
VAT on property transactions
VAT generally applies when purchasing a property from a developer or VAT-registered seller. In these cases, the purchase price usually includes VAT, and buyers do not pay a separate transfer fee.
For most property transactions between private individuals, VAT does not apply and transfer duty becomes payable instead.
Capital gains tax when selling property
Capital gains tax (CGT) may apply when a property is sold for more than its original purchase price. However, South African tax law provides significant relief to homeowners selling their primary residence.
Following the changes announced in Budget 2026, the primary residence exclusion increased from R2m to R3m. This means that the first R3m of profit on the sale of the primary home is free from CGT.
If the profit exceeds R3m, only the portion above this amount is considered for tax purposes. For individuals, 40% of capital gains are included in taxable income and then taxed at the individual's marginal tax rate.
The increased threshold means that many homeowners will now fall completely below the CGT threshold when selling their homes.
“The higher primary residence exemption gives homeowners more flexibility when selling a property they've held for a long time,” Grove explains. “For many people, the profit on their house will now fall below the taxable threshold, reducing the potential tax burden.”
Donation tax and estate duty
Other taxes may apply in certain situations involving property ownership. Donation tax may apply when property is transferred without receiving fair value in return. Individuals currently have an annual exemption of R150,000, after which donations are taxed at 20%, rising to 25% for larger amounts.
Estate duty may also apply when property becomes part of a deceased's estate, depending on the overall value of the estate and allowable deductions.
These taxes are less common in everyday property transactions but may be relevant during estate planning or property transfer.
Budget changes impacting homeowners
The 2026 budget introduced several tax adjustments that may affect property owners.
These include:
- Increasing the primary residence CGT exclusion from R2m to R3m
- Increasing the annual capital gains exclusion from R40,000 to R50,000
- Increasing the annual donation tax exemption from R100,000 to R150,000.
These adjustments provide some relief for homeowners, especially those who have owned their properties for several years and experienced strong price appreciation.
avoid surprises
While some property taxes are a one-time cost associated with buying or selling a home, others are part of the ongoing cost of ownership.
“Understanding how property taxes work helps buyers plan their finances appropriately and helps sellers avoid surprises when disposing of a property,” says Grove. “When homeowners know the rules and limitations, they are in a stronger position to make sound decisions about the property.”
For buyers entering the market and homeowners considering selling, understanding the tax implications of property ownership remains an essential part of responsible financial planning.
Released by Ngwako Serepe