Cape Town is famous for Table Mountain, views, a humming restaurant scene and its laid-back style. It is also renowned for being cliquey, unfriendly and, more recently, for being untransformed and downright racist.
Having lived in this city for nearly a decade I can attest to the fact that Capetonians tend to stick to themselves. In Joburg an invitation to a braai is exactly that. In Cape Town it’s not so clear. This reputation is not new. There is an apocryphal tale of a mining magnate bemoaning that “in Johannesburg there is nothing to do, in Cape Town there is no-one to talk to”.
Because a kind of lazy reductivism thrives on social media, it’s often proposed that there is some kind of conspiracy among white Capetonians to keep black people out of “their” spaces (I missed the memo). This means a deeper discussion on why the city is so racially segregated doesn’t break through too often.
It is true that Cape Town hasn’t transformed as quickly as Johannesburg, but it is wrong to attribute this to the character of its residents. The “middle class problem” of a friend of mine recently illustrated what may be a contribution to the issue.
Years ago he and his wife stretched every financial fibre and took a bond on a grotty cottage in the Cape Town city bowl for something in the region of R2.5m. Managing to get onto the property ladder with a 105% bond in the roaring 2000s, their family has now outgrown the house. However, it has appreciated considerably in value, so they began casting their eyes beyond town and out to the suburbs where, at a big stretch, they could on paper afford a large home for something in the region of R6m.
Then they did some maths. The house they’d seen advertised in Deurdrif (across the freeway from Constantia and an hour’s drive from town in morning traffic) would attract transfer duty of R509,000, and paying an estate agent 4% of the R5m they would hope to fetch for the cottage in town raises the cost of moving to R709,000 before paying a cent towards interest on the loan.
Now that’s a bucket of cash, so my friend eventually spent considerably less than that raising his roof, adding a bedroom and bathroom and renovating the rest of the property. Now this white family continues to live in what is now a beautiful little cottage in a posh neighbourhood. They’re not moving on because they can’t afford to; housing stock in the neighbourhood remains scarce and prices high.
Gentrification
This tax on social mobility affects everyone. In a country characterised by racialised inequality it keeps people where they are, with all the historical implications of that. It’s likely also a driving force behind that other nemesis of the left — gentrification. But when a two-bedroom apartment in Oranjezicht costs R3m (transfer duty R146,000), who can blame people for looking in Woodstock and Salt River?
This affects Cape Town disproportionately because property is relatively expensive by SA standards, and the blanket application of transfer duty by the SA Revenue Service across the country without consideration for the different social implications in different property markets has uniquely amplified consequences in the city.
Transfer duties are not technically regressive, I know, but they do seem to contribute to inequality and other social concerns. It’s more expensive to move in Cape Town than anywhere else, only the very rich can afford to be landlords, and even relatively wealthy people often have to rent properties rather than buy.
Residents of Joburg and Durban’s seemingly more racially integrated suburbs must read the numbers above with astonishment. As the Financial Mail reported a week ago, more and more are doing so, with the “semigration” trend drawing more middle-class people into the morass of Cape Town’s crazy house prices.
Social mobility — and in the case of residential property the associated ability to access the transformative impacts of schools, healthcare and transport — is linked to the ability to trade an asset. A family in a less expensive area of Cape Town wanting to move into a more expensive neighbourhood is frequently taxed out.
For families from Gauteng’s leafier areas a move into an equivalent Cape Town neighbourhood will attract a tax so prohibitive that staying in Melville or Bryanston and installing a solar inverter, a borehole and upgrading to an SUV for the potholes is cheaper.
Another lever the state has is to remove the push factors in other parts of the country, for which it is almost entirely responsible. It is true that Cape Town and other Western Cape semigration destinations such as Somerset West, Stellenbosch, George and Hermanus have much to offer regardless of what happens elsewhere, and semigrants tend to move despite outrageous house prices.
But getting on top of crime, litter, broken traffic lights, trashed electricity and water infrastructure, healthcare failings, sewerage collapse, air quality and all the other challenges residents of Gauteng and eThekwini are forced to contend with would reduce demand for property in the Western Cape, and taxable prices with it.
Other options could be considered to offset a reduced transfer duty, such as considering creating different duty rates and tax liabilities for homes used as primary residences, second homes and buy-to-lets.
I’m aware that the idea of adjusting transfer duties is unlikely to attract much interest at the National Treasury. It makes too much money, and I think for the governing party the outcome that some people on lower rungs of the property ladder might be freed up by reduced transaction costs to move into neighbourhoods of their choice, might need to be politically offset by the fact that a rising tide floats all boats, including those belonging to the very wealthy.
Repeating the fact that DA-run Cape Town is a racially unequal city is a useful talking point for the governing party outside the Western Cape. But like it or not, government does have to hand some tools to address this problem — and thinking hard about the impact of this barrier to integration and social mobility would be good for SA as a whole, and for Cape Town in particular.
• Parker is Business Day editor-in-chief.
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