Costs Of Buying Property In South Africa
When you buy property in South Africa, you’ll typically pay a transfer duty plus a registration fee and conveyancing fee.
Transfer duty is not applicable in all property sales, as it depends on the property price:
- 0%: up to ZAR 750,000
- 3%: ZAR 750,000–1,250,000
- 5%: ZAR 1,250,000–1,750,000
- 8%: ZAR 1,750,000–2,250,000
- 11%: ZAR 2,250,000+
Transfer duty is often paid through your conveyancer at the point of purchase, otherwise it must be paid within six months of agreeing to buy your home (not the date of the completed sale). If you don’t pay on time, you’ll be subject to interest at 10% per annum each month.
Funding A Purchase: Deposits And Mortgages
As a foreign buyer, you’ll typically need a deposit of at least 50% of the purchase price of the property if you are a non-resident. Read about South African visa and permit regulations.
Foreign nationals living in South Africa or investors may be able to loan more at the bank’s discretion. All loans to foreign nationals are typically subject to approval from the South African Reserve Bank. Some banks will require you to set up a South African bank account so your mortgage payments can be debited, although this is not always the necessary as payments can be arranged from an international bank in some cases.
As with mortgages in other countries, the lender conducts a property valuation before lending you the money. They sometimes base the amount they lend on their valuation, rather than the purchase price.
Lenders tend to offer both fixed-rate and variable mortgages, although fixed-rate deals tend to be less popular at the moment as banks offer uncompetitive rates. While mortgages with terms of up to 30 years are available, it’s more common to take out a 20-year mortgage; as a result, your loan will normally be paid off by the age of 70. Most mortgage products in South Africa don’t come with early redemption penalties.
As part of the home buying process, you’ll also need to take out building insurance.
Should You Buy Property in South Africa?
In certain cases, houses for sale in South Africa can make financial sense; rental costs can be expensive, especially in large cities. You can read more in our guide to renting in South Africa.
Currency is another contributing factor. With the Rand (ZAR) devaluing in recent years, it’s now significantly cheaper than it was for foreign currency buyers to purchase homes in South Africa.
Although you can buy cheaply, those planning shorter stays in South Africa should consider capital gains tax. This tax is relatively high in South Africa and can eat into profits on short-term investments. Sellers are typically liable to pay capital gains tax of 33.3% on their profits, after deducting certain expenses.
Building Your Own Home In South Africa
Building your own home in South Africa is a viable option, although the financial benefits of doing so are open to debate.
Unlike some countries, there are no government incentives for people building their own home. While land is relatively cheap, so too are existing properties.
If you choose to build your own home, in addition to buying a plot of land (either from a house builder or privately), you must appoint an architect to design the property and a builder to turn your plans into reality. Architects are usually registered with the South African Institute of Architects. House builders can be found by contacting the National Home Builders Registration Council.
How To Buy Property In South Africa
Once you find your ideal property in South Africa, you need to make an offer – usually through the estate agent. The estate agent requests a formal letter confirming details of your offer (which can also include prospective completion dates). This then goes to the seller for approval. If the seller agrees to the offer, both sides sign the document; this effectively works as a sale agreement.
The seller will now appoint a conveyancer to deal with the legal aspects of the transaction. While the seller usually gets to choose the conveyancer, the buyer pays their fees.
You then must submit identification documents to the Deeds Registry so you can be officially registered as the new owner. As in other countries, the legal process can be time consuming, often running to six to eight weeks.
Once you’re officially the new owner, you must pay the remaining balance. The conveyancer then delivers the title deed.
