What foreigners need to know when buying a property in South Africa
What foreigners need to know when buying a property in South Africa
After visiting South Africa, many foreign visitors fall in love with the country and its people. As a matter of fact, some of them love it that much that they want to make it their new home. Whether they’re moving to Cape Town or another place in the country, there are certain things foreigners need to know before buying a property in South Africa.
Good news
The good news is that foreigners are allowed to purchase and own immovable property in South Africa. Aside from illegal aliens, foreigners are subject to the same laws as nationals, and there are no restrictions. However, it’s still required that foreigners know what this process involves.
First things first
You might have found a dream home and immediately gone to fourwinds-ksa.com to book reliable professionals to transport your belongings. However, the first thing to do is acquire a residence permit if you plan to stay in your property. Therefore, within the first week of arriving, extend your visa to give you time to sort out all the paperwork. Also, if a legal entity has made the purchase, the entity needs to be registered in the country first.
Entering a sale agreement
The common law of South Africa governs the buying and selling processes of property in the country. Even in the case of a foreign marriage regime, the spouse still needs to sign the documents related to the property purchase. In other matters, the attorney can conclude the transfer the same way they would for a resident of the country.
Contact a real estate agency
If you still haven’t found a perfect place, it would be best to contact a real estate agency and find a good realtor. The real estate agent can help you locate the property according to your needs and wishes. And, of course, within the required time-frame. The agent will also help you get the right price and let you know about the charges that this process involves.
A real estate agent will help you buy a property within the desired time-frame.
Making an offer
At this point, it’s essential to know who signs the conveyancing document. The South African Embassy or Consulate in the foreigner’s country can sign these documents, as well as a notary.
Transfer duty tax
If you buy a new property from the developers, the sale price usually includes a VAT (value-added tax) of 15%. But, if you buy a pre-owned property for more than R900 000, you’ll need to pay a transfer duty tax.
Source of financing
One of the most important things to start with is making sure you have enough money to buy the property. Unless you have a full amount, you’ll have to find a source of financing. And the extent to which you’ll be able to borrow money depends on South African exchange regulations.
- Non-resident purchasers who don’t work in South Africa will be granted no more than 50% of the price. You must pay the balance in cash generated in the country or off-shore funding.
- For foreigners with a temporary work permit, the same maximum applies, but the banks determine the loan amount. Except in certain cases, the loan will be given on the condition of reducing the bond to less than 50% of the registered amount before leaving the country.
Bank account
In order to service installments on loans or receive rental income, foreigners can open a local bank account. Deposits into this kind of account will need to be approved by the Reserve Bank.
Non-residents can open a special bank account with a South African Financial Institution. This account can hold the funds that must be spent on the property purchase. After you take care of the financing, the next chapter is the registration of the property.
Cash purchases
If you pay a seller from an overseas account at a discount, you will encounter a problem if you try to sell the property. More precisely, it won’t be possible to take the money out of the country. This is because the money has to come into South Africa via the Reserve Bank, and that’s when the deal receipt is issued. To prove that you spent the money on the property purchase, it needs to go to the real estate agent’s trust account or an attorney.
The next thing that the purchaser needs to think about is the repatriation of funds from the potential property sale. Make sure to keep the documents required to avoid any unnecessary delays.
Carry out the search
The purchaser must be aware of irregularities that might occur during this process. If not, the consequences might be much more severe than in the case of moving scams. After all, buying a property is a significant investment. Thus, a search needs to be carried out to establish that the documents are in order, and the seller is the real owner of the property.
Make sure that the documents are in order.
Tax implications
To purchase a property as a foreigner in South Africa, you’ll need to register as a taxpayer. The process of getting a tax identification number is not complicated, but it’s required for CGT. The highest rate of CGT in the country is around 18% of the capital profit.
There’s a withholding tax when non-residents are purchasing a property for more than R2 million in South Africa. More precisely, they need to withhold a rate from an amount of money paid to the seller until receiving clearance from the South African Revenue Services. The rate spans from 7.5% to 15% of the payable amount.
The process of buying a property in South Africa
The process of buying a property in South Africa is secure and structured. After you sign the offer, the transfer attorney will receive the contract. When the bond is dealt with, and you pay fees and deposits, you can sign the documents and send them to the deeds office. After the transaction is lodged, you can register the property in your name. Although you are undoubtedly impatient to start living in South Africa, it is vital to learn the most critical steps of the process and have professionals by your side.
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