Are you a foreign buyer or non-resident looking to purchase property in South Africa?
While our firm specializes in transfers of properties to local buyers in South Africa, we also have a vast number of foreign clients purchasing property, whom we advice on a continuous basis.
Our aim with this article is to assist foreign property buyers in South Africa, by introducing our one-stop-shop service, which includes:
- Guidance and assistance with regards to all legal aspects involved when purchasing / selling a property in South Africa through our legal team at wva-inc.com;
- Guidance and assistance with regards to all VISA requirements in-and-out of South Africa through our experienced team at visaimmigrationsa.co.za;
- Guidance and assistance through our professional team of Architects at FREEDOM designs on all levels of Architecture and Interior Design. freedomd.co.za,
GENERAL INFORMATION
South Africa has one of the best Deeds Registry systems in the world, offering certainty and security in respect of property ownership and tenure.
Foreigners are referred to as non-residents, 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. There are certain restrictions on property ownership by non-residents – illegal aliens are prohibited from owning immovable property within South Africa.
Non-residents are subject to the same well-established laws and regulations as South Africans when buying property. There are certain procedures and requirements which must be complied with in specific circumstances, such as the local registration of entities registered outside of South Africa where it purchases a property in South Africa, as well as the appointment of a South African resident public officer on behalf of a local company whose shares are owned by a non-resident.
The first step will be, is to find a suitable property to fit your budget and purpose. With today’s technology most properties are sourced and viewed via the Internet and social media. Property is usually purchased through a Real Estate Agent, Attorney Realtor or directly from the owner in exceptional cases.
In South Africa, all contracts to purchase property must be in writing, must contain certain set information and has to be signed by both the buyer and seller of the property, together with two witnesses, for the contract to be legally binding. These contracts usually take the form of an Offer to Purchase or an Agreement of Sale. Once the agreement of sale has been signed by both parties, it becomes a valid binding document from which neither party can withdraw without incurring legal consequences. Accordingly the decision to enter into and sign an offer to Purchase / Agreement of sale is not something to be taken lightly. It is recommended that an inexperienced purchaser obtain independent legal advice if uncertain of any aspect.
The Offer to Purchase will contain certain standard provisions, which we will not cover in detail, but worth mentioning is the following:
A deposit is not compulsory, but it serves as a gesture of good faith and commitment on behalf of the purchaser and indicates financial competence. Provision will be made in the Agreement for a Guarantee to be called for by the Conveyancer, in respect of the balance of the purchase price. In general, a guarantee will only be acceptable if issued by a local financial institution, which means that the funds will actually have to be remitted to South Africa in order for a local bank to issue such a guarantee. Alternatively, arrangements must be made between a foreign and local bank for a back-to-back guarantee to be issued. It is however possible to negotiate the issue of a Standby Letter of Credit from an overseas institution in certain circumstances.
With all sale agreements, it is the property owner’s obligation to (and the conveyancer’s responsibility to collect) provide the purchaser with certain Compliance Certificates prior to date of registration of the property. These certificates include the following and are mandatory where applicable:
- Electrical Compliance Certificate;
- Plumbing Compliance Certificate;
- Electric Fence Certificate;
- Gas Compliance Certificate;
- Borer Beetle Certificate.
These certificates are issued to ensure that all installations are compliant and can only be issued by registered officials.
A property is sold with all fixtures and fittings of a permanent nature situated thereat. Generally fixtures and fittings include anything which is attached to the property, or which by virtue of its considerable mass accedes to the property. In the event of any uncertainty, the purchaser is cautioned to ensure that all items intended to be included in the purchase price are specified in writing in the agreement of sale.
COST INFORMATION
When buying property, the purchaser is responsible for the payment of transfer costs and the costs of registering any new mortgage bonds over the property.
Transfer costs include transfer duty and the conveyancer’s fees. Transfer costs are payable to the conveyancer according to tariffs described by the Law Society.
Transfer duty is calculated as a percentage of the purchase price on the following rates:
| Property value | Rates of tax |
| ZAR 0 – ZAR 900 000 | 0% |
| ZAR 900 001 – ZAR 1 250 000 | 3% of property value above ZAR 900 000 |
| ZAR 1 250 000 – ZAR 1 750 000 | ZAR 10 500 + 6% of property value above ZAR 1 250 000 |
| ZAR 1 750 000 – ZAR 2 250 000 | ZAR 40 500 + 8% of property value above ZAR 1 750 000 |
| ZAR 2 250 000 – ZAR 10 000 000 | ZAR 80 500 + 11% of property value above ZAR 2 250 000 |
| ZAR 10 000 000 + | ZAR 933 000 + 13% of property value above ZAR 10 000 000 |
Buyers must take note of all additional costs when determining their budgets so that the pleasure of purchase is not marred by hefty additional payments due after they have signed on the dotted line.
Apart from payment of transfer costs, the most costly expenses are the various taxes, which property owners in South Africa must pay:
PROPERTY RATES, TAXES & LEVIES:
Property rates and taxes (freehold) are payable annually or monthly, and calculated on the municipal value of the property. A portion has to be paid in advance so that a rates clearance certificate can be obtained for registration purposes.
Property levies (sectional title) are payable on a monthly basis to the managing agents of the body corporate. Levy figures are required and must be paid so that a levy clearance certificate can be obtained for registration purposes.
CAPITAL GAINS TAX (CGT):
CGT is calculated on the profit from the sale of the property. For a natural person, the rate is between 0% and 16.4% of the capital gain. The conveyancer is liable (and instructed by SARS) to pay withholding tax of 7.5% on the proceeds of the sale for property transactions of more than R2 million, in the case of foreign individuals. The withholding tax rate increases to 10% for non-resident companies and 15% for a non-resident trust.
FINANCIAL ASSISTANCE:
Due to South Africa’s high interest rates, most foreign investors who cannot afford to buy cash and require finance will do so abroad, but non-residents can apply for a home loan from a South African financial institution.
However, due to the Reserve Bank’s exchange control requirements, banks will only lend up to 50% of the purchase price, subject to their normal terms and conditions, which would include a valuation of the property.
Technically, if a non-resident has consistently brought funds into the country over a number of years, he/she may borrow up to a maximum of 100% of the total funds invested in South Africa. Theoretically this could also be more than 50% of the purchase price of the property.
It is important for buyers to retain their title deeds (proof of ownership) as proof of the transference of the cash portion from abroad, as they will need it to repatriate the funds once the property is sold. Our office offers assistance to clients to have their title deeds endorsed by the Bank to confirm: “foreign funds received”. This makes the process easier, as without proof, non-residents have to apply to the Reserve Bank for approval before the funds can be transferred out of the country.
VISA REQUIREMENTS WHEN PURCHASING IN SOUTH AFRICA
We are proud to be associated with our professional team of Immigration specialists, in order to ensure our ongoing and uninterrupted service to our foreign purchasers.
All foreign purchasers / non-residents considering property purchases in South Africa, need to ensure that they are in possession of the correct VISA to enable them to spend sufficient time in their acquisition.
Ross Viljoen, Director at Visa Immigration SA, says the permit for which they apply will largely depend on their country of origin and how long they plan to stay in South Africa, and the purpose of their visit.
Many countries are exempt from obtaining a visitor’s visa and can therefore stay in the country for up to 90 days.
Citizens belonging to a country which is listed on the “visa exemption list” makes therefore perfect candidates for the property investment market.
48 Countries are currently listed on the visa exemption list which are exempt from obtaining a visa for visiting purpose and who can stay in the country for up to 90 days. A further 27 countries are on the list who are exempt from obtaining a visa for visiting purpose and who can stay in the country for up to 30 days.
For those citizens, the circumstances are ideal as to invest in properties whilst on holiday.
Nevertheless, should a foreign buyer come from a visa restricted country, that person will still be able to invest in properties, but the process of obtaining a visa, whether this is for short term or long term is a longer process and might be complicated.
However, there are many options out there regarding obtaining the right visa for longer term durations which makes the investing in properties in South Africa attractive aside from the quality lifestyle and favorable exchange rate South Africa has to offer.
We are proud to be associated with the professional team of Architects at FREEDOM designs, with lead Architect and Director Calvin Ettish, who don’t limit themselves to one particular trade or field of expertise, but choose to broaden their knowledge base into all levels of design and property.
Services are provided on all levels of Architecture and Interior Design, Property valuations, Market Analysis and Feasibilities, Property consulting, Property Development and Sales, Landscape Architecture, Interior & Furniture Design.
‘We love a challenge, big or small. We believe in sustainable and renewable Architecture that encompasses function over form.
Architecture is all around us, whether it’s in the city or out in the countryside, it shapes our environment and therefore has the possibility to shape our moods, we strive to create unique & harmonious spaces that comforts a person all year round.”
Apart from South Africa being home to several internationally acclaimed and award-winning destinations, the immensely low value of the rand compared to most foreign currencies, makes residential property in South Africa an increasingly attractive investment option. Being a foreigner, purchasing property can be a nerve-wrecking and costly experience if you are not aware of the pitfalls, or guided in the right direction. It is our aim to guide you through the entire process to enable a smooth transition of ownership.
These guidelines have been researched and prepared by Wietz Viljoen of WVA Inc, Cape Town, and is merely for information and guidance purposes.
For further information about our detailed services, kindly contact:
WIETZviljoen
WVA INC.
Attorneys & Conveyancers
0861 WVA INC
ROSSviljoen
VISA Immigration SA
+27215560075
CALVINettish
FREEDOMdesigns
0861 FREEDOM
