Property : Buying Property In South Africa

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Buying property in South Africa as a foreigner is not too complicated. What a foreigner needs to do is first find a reputable estate agent that can help source a property that is suitable.

If you are buying privately you can approach the seller direct and organize an attorney to help you with the process.

An estate agent works on commission and only gets paid on the successful sale of a property. Typically commission is around 6% of the selling price.

The seller is the person that pays the commission not the buyer.

The buyer will be responsible for the transfer costs, ie, legal fees and tax.

The buying of property in South Africa needs to be put in writing, and is called an offer to purchase.

An offer to purchase or sales agreement needs to be signed by both parties and any changes need to be initialed by both parties.

An offer to purchase normally contains the

1)price of the property, ie, purchase price.
2)When the property will be transferred in buyers name, this usually take +- 2 months.
3)When the purchaser wants occupation and how much rental to pay if there is early occupation
4)A beetle and electrical certificate which needs to be supplied by the seller.
5)A voetstoots clause which means the property is bought as is, so check that property out properly.
6)A fixture and fittings clause, ie, what the house is sold with.
7)A deposit clause, it is not necessary to put down a deposit but it shows good faith and makes your offer stronger.

These are just a few of the main clauses.

In South Africa we have a deeds office that records all

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property ownership. Property record keeping is excellent and accurate in South Africa.

Property can be owned individually, jointly in undivided shares or by an entity such as a company, close corporation or trust or a similar entity registered outside South Africa.

The banks in South Africa will lend a non resident of South Africa 50% of the purchase price subject to the conditions of the bank, such as finding value for the property.

A non resident is commonly defined as a person not living in South Africa or a south African who has lived overseas for more than 5 years in regards to obtaining a loan from a bank.

The purchaser is responsible of the payment of transfer costs and the costs of registering a mortgage bond over the property purchased.

Transfer costs include transfer duty and conveyancers fees. Transfer duty is calculated as a percentage of the purchase price and varies depending on the purchaser's legal status. For a legal person it is 8% of the purchase price. For a natural person the calculation is as follows :

· For a purchase price of R0 - R500 000.00, the duty is 0%
· For a purchase of R500 001.00 - R1 000 000.00, the duty is 5% on the value above R500 000.00
· For a purchase price of R1 000 001.00 and above, the duty is R25 000.00 + 8% on the value above R1 000 000.00

Converyancers fees, charged by the attorneys for attending to the transfer and registration of mortgage bonds are calculated according to a tariff.

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capital gains tax as with all property transactions.

Capital gains tax is calculated at 25% of the profit on the sale of the property which then gets taxed at the tax rate on income for the year.

Non residents will need to register for tax for the year they sell their property.

The marginal or maximum tax rate is 40% in South Africa.

I believe the property market in South Africa is in a boom faze for the next few years.

From 2000 to 2005 we have seen amazing growth and all indications are there that this growth will continue.

In Cape Town and especially in the blaauwberg area property has grown at25% and more per annum the last few years.

Buying smartly and holding onto property long term is the ideal investment to make.
My advice to investors is “never sell your property”

Hold onto property as long as you can!

For any advice or if you are looking to invest in property in South Africa then give us a call, we appreciate all business.

Ashley D
Husband and wife Team at Remax, Cape Town, blaauwberg.

About the Author :

We are a husband and wife team selling property for remax in Cape Town. I joined remax property associates in 2003 and before that worked in property in the blaauwberg area. My wife joined me at remax at the end of 2004 Http://www.husbandandwifeteam.com Source: www.isnare.com

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