At the moment, there are no restrictions on foreigners buying property in South Africa, unless they are illegal immigrants.
At the moment, there are no restrictions on foreigners buying property in South Africa, unless they are illegal immigrants. “There has been some confusion about this,” says the Rawson Property Group's Managing Director Tony Clarke, “because legislation currently under consideration may in the future impose some limits on foreign ownership of farms and agricultural land.”“There has been some confusion about this,” says the Rawson Property Group's Managing Director Tony Clarke, “because legislation currently under consideration may in the future impose some limits on foreign ownership of farms and agricultural land.”
However, he says there are no plans to change the current situation with regards to residential or commercial property, although actual purchase processes vary from country to country, so buyers from outside SA are advised to seek the assistance of a reputable real estate group to ensure the transaction goes smoothly.
Meanwhile, Clarke says the most important things that non-resident buyers need to know are the following:
1. In SA all contracts to buy property need to be in writing. Such contracts usually take the form of an Offer to Purchase or an Agreement of Sale and are legally binding once signed by the buyer and seller. Contracts can be signed overseas before a Notary Public or at the SA embassy in certain countries, but non-resident buyers usually find it easier and cheaper to give a trusted representative in SA power of attorney to sign the necessary documents on their behalf.
2. Non-residents who are purchasing property in the name of a company or other legal entity rather than in their own names will first have to register that entity in SA and appoint a local public officer.
3. Non-residents who are intending to stay in their SA property for long periods will need to comply with the Immigration Act and may need to acquire a residence permit.
4. Non-residents who are bringing funds into SA to pay for their property purchase should deposit these into a trusted account of the representative who is handling the transfer of the property into their name. The representatuve will then disburse them correctly on the day the transfer is registered. When depositing funds from abroad into any SA bank account, non-residents should ensure that they are issued with a “deal receipt” which they will need if ever they wish to repatriate their funds and/or any profit on the sale of the property.
5. Foreigners who are not residents in SA and do not have a valid work permit are only allowed to borrow an amount equal to the amount of money they bring into the country in order to finance a property purchase. Usually this means that they can only qualify for an SA home loan for a maximum of 50% of the purchase price. To do so, they will also need to provide proof of identity, income and their address in compliance with international practices.
6. If they need a local bank account to service instalments on a home loan or perhaps to receive rental income from the property they have bought, non-residents can open one, provided once again that they are able to produce the correct documentation. They should note, however, that any deposit made into this account in SA will require the approval of the Reserve Bank, because non-residents are not allowed to generate any income in SA except for rentals and the interest on investments such as shares.
7. Once the financing details have been finalised, the transfer attorney can go ahead with getting the property registered in the new owner’s name at the local Deeds Office, which keeps the record of all property titles in a particular area. This process generally takes six to eight weeks, as the attorney first needs to obtain municipal and tax clearance certificates, cancellation figures for any existing mortgage bonds over the property and various other documents. The costs of this work and preparation of the legal documents required to effect transfer of the property title registration from the seller to the buyer is usually for the buyer’s account, although the seller usually appoints the transferring attorney. The seller, on the other hand, is liable to pay any commission due to the estate agent.
8. Transfer duty (tax) is also payable by the buyer on all pre-owned properties in SA valued at more than R750 000, on an upward sliding scale, with the maximum calculation being R85 000 plus 11% of value for property prices at R2.25 million and more. Newly-built properties, on the other hand, usually attract value-added tax (VAT) at 14% of value, included in the sale price.
9. Occupation of the property is usually given on the date that the transfer of ownership is registered, although alternative arrangements can be made provided they are put in writing and again signed by both buyer and seller. Occupational rental may be payable by whichever party occupies the property while it is registered in the other party’s name.
10. Non-residents who decide to sell their property in SA at a later stage can repatriate all funds invested plus any profit made on the sale, less Capital Gains Tax. The repatriation will need to be approved by the Reserve Bank and they will need to produce the original agreement of sale, the transfer attorney’s final account and any deal receipts they were given when they brought funds into SA.
The information in this article is courtesy of www.property24.com