Choosing property in areas with well-run, efficient municipalities that provide high quality services to its residents and support local businesses ensures long-term growth for your investment.
Property values accumulates over time. The longer you hold on to it, the more valuable it will become - depending on certain factors. For one, the state of the economy seriously influences supply and demand in the real estate market - and in turn price growth and property values.
While the black swan of Covid-19 during 2020 created economic havoc for South Africans, the sharp rate cuts have kept the property industry resilient.
READ: A look at SA's 2021 expected rate hikes and why sellers are 'dropping asking prices by 10%'
Various environmental factors will continue to affect the value of your property. Importantly, successful municipalities are crucial for the value of your neighbourhood to increase.
The unfortunate reality is that not many of South Africa 105 largest local municipalities or its key 8 metros are well run, financially fit or providing quality services to its residents. This is according to the latest Ratings Afrika annual Municipal Financial Sustainability Index (MFSI™). Its analyses is based on the financial results for the fiscal year ending in June 2020.
Ratings Africa CEO Charl Kocks and Analyst Leon Claassen state that "the financial sustainability of the South African municipal sector has deteriorated dramatically" since the inception of the index in 2011 and even more with the shock of the pandemic.
READ: Buyers drawn to quality of life in Mossel Bay, SA's 'most well-run town'
And while the running of municipalities remain heavily politicised, there are however a few exceptions, with those mostly found in the Western Cape, according to Ratings Afrika. The City of Cape Town remains South Africa’s only metropolitan municipality to be in financial good standing. Aside from Cape Town, national government would need to spend over R50-billion to cover the cash deficits across municipalities, according to Ratings Afrika's MFS Index.
READ: Western Cape 'ripe with affordable housing potential'
"The two key forces that drive a municipality’s financial sustainability are the generation of operating surpluses and positive working capital (liquidity or cash) balances. However, through gross financial mismanagement and lack of corporate governance the majority of the South African municipalities are still operating at deficits," says Kocks.
"It is no wonder that services are breaking down in most municipalities and that infrastructure is crumbling at a pace unheard of. South Africa faces a calamity of major proportions if this lack of sustainability is not dealt with effectively and as a matter of urgency."
| Best performing municipalities by province in 2020 according to MFSI* |
| Province | Municipality | Score |
| Western Cape | Mossel Bay | 74 |
| Gauteng | Midvaal (Meyerton) | 70 |
| KwaZulu-Natal | KwaDukuza (Stanger/Ballito) | 65 |
The MFSI™ is a scoring model that evaluates six financial components, namely the operating performance, liquidity management, debt governance, budget practices, affordability and infrastructure development of a municipality; and scores these components out of 100.
READ: SA homeowners to prepare for 'bigger than usual' municipal rates increase
The MFSI™ is furthermore a numerical expression of Ratings Afrika’s definition of financial sustainability stated as, "The financial ability of a municipality to deliver services, develop and maintain the infrastructure required by its residents without unplanned increases in rates and tariffs or a reduction in the level of services. Additionally, the municipality should have the capacity to absorb financial shocks caused by natural, economic, political and other adversities without external financial assistance.”
| Average listing prices in these 'well-run municipalities' according to Property24 Trends Data |
| Municipality / Town | 2020 Average Sale Price - Erven | 2020 Average Sale Price - Sectional Scheme Units | 2021 Average 3-bedroom asking price | 2021 Average 4-bedroom asking price |
| Mossel Bay | R990 000 | R1.2 m | R2.365 m | R3.5 m |
| Midvaal - Meyerton | R600 000 | R686 000 | R1.270 m | R1.822 m |
| KwaDukuza - Ballito | R1.865 m | R2.850 m | R3.455 m | R7.5 m |
READ: When is a good time to sell your property and what affects its value?
Pent-up demand due to the Covid-19 pandemic and restrictive lockdown measures have impacted year-on-year trends, with average annual sales across most areas trending downwards and only expected to recover towards the end of 2021 - Here we take a look at the average list and sale prices for the top three well-run municipalities in the country, according to Ratings Afrika annual Municipal Financial Sustainability Index.
Mossel Bay - During the Covid-19 Pandemic year of 2020 there was a 29% difference in the average asking and sold price for this Garden Route town. With over 6 000 properties for sale in Mossel Bay, 3-bedroom homes are the most widely available with 1 500 properties in this bed-count currently listed for sale. The average price for a 3-bedroom home in the area is R2.365 million, while a 4-bedroom home will cos about R3.5 million. The bulk of buyers and sellers over the past six months fall mostly within 50 to 64-years age group. Click here for more detailed trends in Mossel Bay.
READ: 'Affordability and convenience' driving SA buyers to the South Coast
Midvaal - Meyerton - In 2020 there was an average difference of 30% between asking and sold price of properties in the area. Of the 3 571 properties listed, 3-bedrooms are the most widely available with 848 listings currently. The average list price for a 3-bedroom home is R1.270 million, while the average list price for a 4-bedroom home is R1.822 million. Buyers fall mostly within the 36 to 49-years age group 38%, while sellers are mostly within the 50 to 64-years age group in Meyerton at 36%. Click here for more detailed trends in Meyerton.
Properties sold for an estimated 27% less than what they were listed for in 2020. Of the 6 438 properties currently listed for sale in the area, 3-bedrooms are the most widely available with 1 700 currently on the market. The average list price of a 3-bedroom is R3.455 million while a 4-bedroom property will cost you average of R7.5 million. Those looking to buy in this popular KwaZulu-Natal town fall mostly within the 36 to 49-years age group at 41%, while sellers are mostly within the 50 to 64-years age group at 36%. Click here for more detailed trends in Ballito.
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*Property24 Listings Data Disclaimer: The trends detailed in this article are based on Property24 listings, current at the time of publishing, and property transfer data supplied by Deeds offices, which typically take 3-4 months to reflect. Suburbs are listed according to Property24's geographical database. In some areas this will include both commercial and residential properties. The age demographic data of buyers, sellers and stable owners is determined over a six-month period. These Property Values should not be used as a substitute for independent professional advice and is subject to Property24.com Terms and Conditions.
*Municipalities, communities and other interested parties can purchase an individual MFSI™ report of a specific municipality from Ratings Afrika - Click here to contact them directly.
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