Expert tips and overview of costs can help you prepare for buying property in South Africa.
Updated: Nov 18, 2019
Real Estate market in South Africa
House prices have been relatively stable in South Africa, with home-ownership levels at around 60 percent of the population.
The average national price for an entry-level home (80–140 sqm) is around ZAR 937,000 (USD 69,000), with an average medium-size house currently costing around ZAR 1,255,000 (USD 85,000). Despite steady increases in the last year, property prices in South Africa remain relatively low.
Foreign buyers are allowed to freely purchase property, although mortgage options are limited for non-resident buyers to just 50 percent of the property purchase price. The transaction costs of buying a home in South Africa should also be calculated in, which can range anywhere from 5–15 or more on top of your property price, with taxes depending on the price range of your property.
Should you buy property in South Africa?
In certain cases, houses for sale in South Africa can make financial sense considering that 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, which 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 percent on their profits, after deducting certain expenses.
How to find houses for sale in South Africa
Property for sale in South Africa is generally handled by real estate agents, and private sales are relatively rare. Estate agents in South Africa must be registered with the Estate Agency Affairs Board and agents are issued annually with a certificate that says they agree to comply with the latest code of conduct. Many agents are also members of the Institute of Estate Agents of South Africa.
Funding a purchase: deposits and mortgages
As a foreign buyer, you’ll typically need a deposit of at least 50 percent of the purchase price of the property if you are a non-resident. Read about South African visa and permit regulations. Foreign nationals who are resident and working 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 will conduct property valuation before agreeing to lend you the money, and will sometimes base the amount they lend on their valuation, rather than the agreed 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, and your loan will normally have to 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.
Costs of buying property in South Africa
When you buy property in South Africa, you’ll typically need to pay 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:Up to ZAR 750,000: 0 percentZAR 750,000–1,250,000: 3 percentZAR 1,250,000–1,750,000: 5 percentZAR 1,750,000–2,250,000: 8 percent ZAR 2,250,000+: 11 percent 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 percent per annum each month.
Registration fees are also due to finalise the property transfer:Up to ZAR 150,000: ZAR 70ZAR 150,000–300,000: ZAR 350ZAR 300,000–500,000: ZAR 450ZAR 500,000–1,000,000: ZAR 550ZAR1,000,000 – 2,000,000: ZAR 650ZAR2,000,000 – 5,000,000: ZAR 1,050ZAR 5,000,000+: ZAR 1,250
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