Published on 22 February 2006 at 12:10 pm
Filed under: Africa:- South Africa Property Guides » South Africa Purchase Process for Real Estate
The purchase process for real estate in South Africa is incredibly well regulated and property investors from overseas are even protected in their dealings with estate agents in South Africa as they have to be qualified and registered with the Estate Agents’ Board.
There are currently no significant restrictions applied to non-resident purchasers of real estate in South Africa and this guide details a typical purchase process for overseas investors.
Non-resident purchasers of property in South Africa can either choose to buy real estate directly in their name or through some form of legal holding entity such as a trust or company structure. Some prefer this method of property acquisition for taxation and management purposes as well as asset protection reasons; an individual should discuss their own method of purchasing with the assistance of a South African property specialist or their lawyer.
The methods of property ownership in South Africa are either freehold or leasehold, sectional title and share block. The majority of properties that non-resident purchasers acquire are leasehold as the method of property transfer and the rules relating to the use of that property are far more flexible.
There are specific exchange control rulings in South Africa that detail any restrictions that apply to non-resident purchasers when remitting funds to South Africa or repatriating funds overseas on the resale of real estate. Basically any property investor who remains non-resident can remit and repatriate funds freely; furthermore a non-resident can repatriate any capital gains made after the deduction of any taxation due.
Those foreign buyers who purchase investment property in South Africa and then decide to move to live in South Africa will have their application for residence viewed in light of the fact that they have already invested in property in the country. Once an individual becomes resident in South Africa they may only remit and repatriate funds for five years after which time they fall under the controls of the exchange control restrictions that are imposed on South African residents.
Those who wish to secure finance to purchase investment real estate in South Africa can raise up to 50% of the purchase price locally in South Africa (occasionally lenders will lend up to 75% to non-resident purchasers with whom they have established a working relationship)…naturally enough any mortgage raised in South Africa has to be used to buy real estate in South Africa. Mortgage arrangement fees have to be paid in addition to the purchase price and it is worth securing a provisional mortgage offer before committing to buy any piece of real estate in South Africa as it will make the entire purchase process flow much more quickly.
Once property has been found that matches a property investor’s requirements, and price and condition negotiations have been carried out to the satisfaction of both the investor and the vendor, an official written offer to purchase can be made or a deed of sale signed – either document is legally binding and should be examined carefully by a lawyer before either side signs on the dotted line.
An investor should secure the services of a lawyer to assist with the entire conveyancing and purchase process and they should be on hand to check any contracts and to carry out title and land registry searches and checks. A deposit is usually payable when the preliminary contract is signed and then there is a fixed period written in to the contract until the completion date. During this period it is usual for the lawyer to complete all checks and searches and for the investor to make funds ready for the day of completion.
On the completion date the final monies are payable and the property can effectively be transferred into the property investor’s name. The registration and transfer of the property is handled by the vendor’s conveyancing lawyer, the vendor gives them power of attorney to handle the rather long drawn out and convoluted process of registering the property at the Deeds Office of the Department of Land Affairs in the name of the non-resident investor.
And finally, in terms of extra fees, taxes and charges to be borne by the investor, these include transfer duty which is levied by the government and is a variable rate tax of between 1 and 8% for private ownership or 10% for purchase via a legal entity such as a trust. Transfer costs of between 1 and 2%, mortgage costs, estate agents fees which are normally included in the price and lawyer’s fees which should be negotiated before agreeing their services are also all payable by the property investor.
Africa:- South Africa Property Reports
Complete listing of all current property reports for region: Africa:- South Africa
