Buying SA property: tips for non-residents

Private Property South Africa
Cathy Nolan

In South Africa, properties are normally purchased through an estate agent, who should be registered with the Estate Agents Advisory Board.

The South African Reserve Bank refers to foreigners as “non-residents”, irrespective of whether they are natural persons or legal entities, whose normal place of residence, domicile or registration is outside the common monetary area of South Africa. However, a transaction can be processed without intervention from the bank should a non-resident purchase a property for cash.

In the event that financing is needed, non-residents may borrow up to a maximum of 50 percent of the purchase price in South Africa. The remaining 50 percent must be brought into the country by the purchaser and transferred from a recognised foreign bank to a bank in South Africa. The total amount that may be borrowed is at the discretion of the commercial bank offering the loan.

Non-residents who are in possession of a valid South African work permit are considered to be residents for the duration of their permit and are therefore not subject to the borrowing restrictions that are placed on non-residents without work permits

Here some answers to questions that are frequently asked by foreigners who wish to purchase property in South Africa:

Can non-residents own property in South Africa?

Non-residents can own property partially or wholly, in their own names or through ownership of an interest in one or other forms of legal entity

Can non-residents lease their properties out to others?

Non-resident owners of South African property have all the normal rights of ownership including the right to recover rental income from lessees. Rental income is normally taxable in South Africa.

How secure is the investment?

South Africa’s banking system is dependable, established and highly advanced. The transfer of funds through any registered South African bank is secure and guaranteed. Once the money transfer has taken place, it is usually held in trust by an attorney or real estate agency, either on behalf of the purchaser or the seller until registration of transfer. The holding of the funds in trust by an attorney is a cornerstone of the attorney’s practice and is regulated by law societies and secured by the Attorney’s Fidelity Insurance.

On the sale of a property, can non-residents get their money out of South Africa?

The Exchange Control Rulings stipulate that funds brought into the country by a non-resident may be repatriated at any time, as well as any capital gain thereon after deduction of any Capital Gains Tax payable. Non-residents are, however, liable for Capital Gains Tax after the sale of a property.

What forms of ownership are available and which is the best?

The most common form of ownership is that of individual title. Property may also be held through share ownership in companies, holding membership in close corporations or as a beneficiary in a trust. This choice is usually dependent of decisions related to tax or transfer duty issues, or relating to the protection of assets. A close corporation is a type of company that is flexible and cheaper to form and administer than a normal incorporated company. A close corporation and a trust can usually be formed in less than a month. A proprietary limited company may take a few weeks longer.

On registration, all existing mortgage bonds registered over the property are cancelled simultaneously with the registration of any new mortgage bonds by the purchaser in favour of the bank granting the financial assistance. The purchaser is recorded as the new owner of the property and the purchase price is paid to the seller. This procedure does not apply where the shares/members interest and loans are acquired in a property-owned company/close corporation where no change in ownership is recorded.

Companies and trusts in South Africa are based on English law and are very similar in nature to those in England.

Are there additional costs to the purchase price?

Yes, there are a number of variable costs that should be considered when determining the total amount involved in all property transactions

  • Transfer costs and transfer duty on the purchase price

  • Bond costs based on the loan amount

  • Drafting/checking the agreement of sale

  • The conveyancer’s sundry expenses

  • A rates clearance certificate

  • The issue of guarantees

  • Property inspection fees

  • Insurance premiums

  • Building loans (interim interest)

  • Pro rata share of rates and taxes

  • The estate agent’s commission (the recommended tariff is 7.5 percent plus VAT, which is currently 14 percent)

What are the bond costs?

These costs relate to the costs incurred in raising mortgage finance. Mortgage registration fees are payable to the registering attorney according to a prescribed fee schedule. Banks require the bond to be registered for an amount that is usually in the region of 20 percent higher than the amount that has been loaned. This ensures that the bank’s debt is secured in the event of the outstanding balance exceeding the original loan. The cost involved in cancelling a bond is payable by the seller.

Share:

Found this content useful?

Get the best of Private Property's latest news and advice delivered straight to your inbox each week

Related Articles

Things are looking up for first time home buyers
Slow price growth and a recent decrease in the interest rate have seen more first-time buyers enter the market.
Moving from renting to buying
If you’ve been renting for a while and are ready to take the next step to buying your own home, you need to do your homework and know exactly what you are getting yourself into.
What is important for a first time home buyer?
Getting on the property ladder can be daunting experience, especially for a first time home buyer. Here's a step by step guide to make the process a little easier.
;