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
South Africa has one of the most sophisticated and accurate systems of property registration in the world.
All property information records are kept at the Surveyor General’s Office in the form of a SG diagram which details the exact location and extent of property.
A Title Deed is assigned to every property. It records all limitations on transferability and use of the property such as bonds and servitudes and is held by the Deeds Office.
An Estate Agent or the public can call for this information if required.
Most property in SA is owned on the basis of Freehold Title or Sectional Title. Freehold Title confers full title to the land and improvements on the land and Sectional Title confers full title of the demarcated Section of a building.
Your quick guide to the property transfer processMost property sales in South Africa are handled by registered Estate Agents who will assist in preparing the Offer to Purchase and will shepherd the progress of the transfer and registration process. It is also legal for owners to buy and sell property privately.
How it Happens – Step by Step
Should a purchaser wish to form a new Company or Close Corporation to be the transferee, he will have to sign the Offer to Purchase on behalf of the legal entity to be formed. Once the Company/Close Corporation has been formed, the directors will have to ratify the Deed of Sale.
Please note that it is not possible to sign an Offer to Purchase on behalf of a Trust to be formed. The Trust must be in existence with a Letter of Authority from the Master of the High Court before it can purchase, or make an offer to purchase, a property
If a purchaser wants to nominate another person as the transferee, the name and address of the nominee must be provided in writing on the same calendar day that the sale was entered into, i.e, by midnight on the date of sale. Should the nomination only occur on the next day, double transfer duty will be payable.
The information in this article is courtesy of www.showme.co.za
When deciding on investing in property for the first time, there a few key elements that investors should take into consideration - such as whether they are investment-ready and well informed on all the available options.
This is according to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who says buying a property is a major commitment that should be carefully evaluated in terms of your life plans and financial situation - both currently and in the future.
He says as a first-time property investor, it is vital to be informed and ask the right questions, such as when, where, why and how to invest in your first property.
Goslett shares some guidelines as to how first-time investors can find the answers to these questions:
1. When should you invest?
According to Goslett, the short answer to this question is as soon as you can afford to. While it is important to watch the market and buy at the right time, it is never too early to get into the property market.
He says property investors should take the necessary time required to ensure that they make an educated decision, assessing whether they can afford to make the necessary financial commitments.
To make an accurate assessment of this, it is advisable to use the resources available. For example, banks and bond originators will be able to give investors estimated repayment figures based on bond requirements.
Goslett says monthly bond repayments should not exceed more than 30% of the buyer’s total expenses, and most buyers will be required to put down a deposit of between 10% and 30% of the purchase price of the property before they are approved for finance.
It is important to keep in mind that it is not just the bond repayments that will need to be paid. There are a number of other costs involved in a property transaction that can add up to a substantial amount. These fees include transfer duties, Deed Office fees and levies, municipal rates, bank charges, bond initiation fees, home insurance costs, the monthly administration fee charged by the bank, moving costs and the cost of maintaining the property.
It is essential to include all of these aspects into the calculation when assessing affordability.
2. Where should you invest?
According to Goslett, location is of the utmost importance, and in terms of investment, can never be stressed enough. Location is vital because being in the right area and position will ensure a good resale value and return on your investment, he says.
When looking into an area, consider proximity to amenities such as schools and shopping centres.
Online property search portals can be used to find statistics on areas and values of properties. Estate agents can provide you with a comparative market analysis, which will give you thorough knowledge of the property sales dynamics of a certain area, he says.
3. Why invest?
Property remains a solid asset class in which to invest. Goslett says buying property is a huge step towards financial security and growth, and is a great way to invest in your future.
“Property is far less volatile than the equity or share markets and, unlike other investment options, property investors have complete control over their asset.”
Generally, Goslett says property prices tend to increase fairly consistently over time, which makes it a lot easier to gauge the estimated return on investment much more accurately than any other investment class. He says property owners will not have to sleep with one eye glued to the stock market and have to sell the minute the market is at a high.
He says the other beauty about property is that it is the only asset class that can be financed and leveraged. In layman’s terms this means that an investor can buy property with someone else’s money.
If an investor can prove affordability and meet the loan repayment conditions, property is practically the only investment option that banks are willing to finance.
This is because they know that if managed correctly, the money they lend to individuals is being invested in an appreciating asset. If you are looking for an investment that either keeps up with inflation or outstrips it in terms of growth over the long term, then property is for you.
4. How to invest
Save, save, save. Wherever possible, an investor should put aside as much money as they can.
Goslett says the larger the deposit, the lower the repayments and the easier it is to buy a property. It is also vital to have as much disposable income as possible, as this will have a bearing on whether the bond is approved or not.
Paying off any existing debt as soon as possible will improve the investor’s disposable income along with their credit rating. Maintaining a clean credit record will be invaluable when being assessed for bond approval.
Goslett says once the investor has the required deposit and decided on the type of property that will suit their life stage, working with a mortgage originator will ensure that the bond application is a smooth, hassle-free process.
"When you are ready to take the next step, it is important to partner with a reputable estate agency to help source the right property," he says.
The information in this article is courtesy of www.property24.com
In the South African property sector, there is a growing interest in buy-to-let property investment right now – and this, says Tony Clarke, Managing Director of the Rawson Property Group, makes good sense because the advantages of this type of investment far outweigh its disadvantages.
Asked to list the benefits as he sees them, Clarke mentioned that:
1. Buy-to-let properties can often be – and usually are – bought with a bank loan. This means that the investor’s rent and capital gains are based, not on the amount he has paid out to date, but on the total value of the property. His gains, therefore, are made on money that is, in reality, not yet his. By way of contrast stock exchange shares and money market products usually require full payment upfront – and are more subject to fluctuations.
2. Buy-to-let properties almost always give satisfactory capital growth in the long term because housing, being a primary human need, is always in demand and there are usually stock shortages. This is an asset class which, although affected by economic swings, tends to be more resilient than others. Over any 10 year period in South Africa’s history, a minimum growth of at least 45% has been achieved.
The disadvantages to this type of investment are that, although this has not been the case in South Africa for some time now and no one expects this scenario to occur in the foreseeable future, there can be periods where tenants are in short supply and, if found, are able to negotiate ultra-low rents.
Another disadvantage is that, even in good periods, it is possible for the investor to find that he has ended up with an unreliable tenant. In these circumstances, the investor and his agent may well have to resort to expensive, time consuming legal action to obtain a satisfactory outcome – possibly even an eviction. During these drawn out proceedings, it’s probable that he will have to find his monthly mortgage bond payments without the help of regular rent income.
Unsatisfactory tenants have all too often also been known to damage properties - and reclaiming the cost of this usually proves difficult.
Buy-to-let investments, says Clarke, have to be viewed as long-term and, by the same token, investors should choose their properties on their ability to attract tenants five, ten or fifteen years down the line. Areas that are popular now, but showing signs of declining, should be avoided.
“In view of the supreme importance of location,” said Clarke, “it’s essential to identify the trends affecting the various areas, if necessary paying higher than originally budgeted to be in an up and coming area.”
“In addition,” he says, “unless the investor has in-depth property experience, it will usually pay to employ a professional agent who is remunerated with a commission of 10 or 12% of the rent each month. This relieves the landlord of on-going rent collection, tenant management, rates, services, tax payments and other possibly irksome duties. Most importantly, however, it also means that the accepted tenants’ previous leasing, credit and employment records would have been carefully checked through special organisations set up for this work. This, in turn, greatly reduces the chances of having a fly-by-night or non-paying tenant.
Another apparent drawback of property investments, one which seems to be a negative but in fact is a positive, is that property can take time to sell. Many other investments are often easier to withdraw from and enable the investor to realise quick cash assets. By contrast, the property seller has to market his property, find a buyer and wait for transfer before getting his hands on the cash. This, however, means that the property investor tends to see his investment as a forced saving and does not react too quickly to fluctuations, many of which turn out to be temporary.
Clarke said that the Rawson Property Group and Rawson Developers have buy-to-let clients who have built up substantial property portfolios which often allow them to retire early.
“One can learn a great deal from such people,” said Clarke. “The mere fact that so many of them have been successful testifies to the truth that this type of investment is suited to the man-in-the-street because it is very difficult to hide awkward, negative aspects in property – as is often the case when one is investing in less transparent asset classes where one’s involvement is less hands on.”
“In closing, property may not seem to be the best vehicle for the investor’s money but he can rest assured that over the long term it is by far the safest asset class and is capable of giving excellent returns.”
The information in this article is courtesy of www.rawson.co.za
With South Africa’s endless shoreline beauty, mountainous gems, paradise towns and other attractive world-class holiday locations, it is no wonder that there is great demand for homes in these areas to act as holiday getaways.
Richard Gray, Harcourts Africa Chief Executive Officer, says these properties are very popular and, when the right path is followed, can prove to be fruitful investments and value-for-money holiday bases.
Gray gives his top tips for buying a holiday home:
1. What can you afford?
“First off, and most importantly, is deciding on affordability,” says Gray.
He says there are tax implications when owning a second home, and you also need to calculate thoroughly whether you can afford paying a second home loan and utilities, especially if you plan on letting the property.
If there is a time when you have no tenants, can you afford to cover the shortfall?
2. Location, location, location
Next, Gray says you have to choose the location.
“It seems simple enough to decide on the location of the holiday home you wish to buy, as you surely want to purchase where you prefer to go on holiday,” he says.
“However, does investing in this location actually make sound financial sense?”
When you start, identify a handful of locations you usually visit, and also identify areas you find by doing research on locations that show the most promise. Narrow these suburbs down to match your needs, and then do more homework.
“Contact agents in each of these areas and ask them what the average return on investment and growth percentage has been for properties in your price range,” says Gray.
“Also ask if there are any developments going up in the area, which will be a sign of interest by investors, and could present you with possible property opportunities that will be well looked after by a body corporate.”
3. Finding your holiday home
Once you’ve decided where you want to buy, Gray says distance comes in to play as you are often buying far from where you live.
“This is where property portals and the online space can be a great help,” he says.
“Ask the agent if they have virtual listings, which are video tours, of homes in the area for you to see. This way you can get a real good look at the different properties before spending the money to go and view.”
Assess demand in the area by browsing listings of similar value in the suburb online. Here you can gauge what the demand is, so when the time comes and you decide to let out the property in the months you’re not there, you know you will be able to find good tenants relatively easily.
4. Maintaining your holiday home
Gray says maintenance is always a major concern, largely because owners usually live far from their holiday property.
What is the point of buying a home you want to enjoy during your stress-free time or to act as an investment if it only depreciates and causes headaches because of a lack of maintenance?
“There are a few options here, and the best possible route is hiring a managing agent that will greatly reduce your hiccups by constantly keeping an eye on the property,” he says.
“Managing agents also ensure you are informed when problems arise, and they have electricians, plumbers, and so forth on call that can attend to any problems that occur while you’re away.”
5. Furnishing your holiday home
Lastly, Gray says furnishing a holiday home is often required, and this can prove tricky.
“Many holiday homeowners break the bank hoping to create a space that resembles home as well as an environment they feel comfortable in when they go on holiday,” he says.
“This is a personal choice and should also be considered carefully. A home standing open an entire year with many valuables can be a target for potential thieves. So be smart.”
All things considered, Gray says buying a holiday home is an exciting venture, and with the right agent assistance and research, can be a lucrative investment and a place where memories will be etched into the minds of those who spend their holidays there.
The information in this article is courtesy of www.property24.com
Times are tough. Inflation’s up, interest rates are up, debt repayments are up and most consumers simply don’t have anything left at the end of the month for savings, no matter how hard they try.
“And that is one of the most important reasons for anyone buying a new home to choose a property that not only meets their size and design criteria, but is also likely to deliver a good return on their investment,” says Bill Rawson, Chairman of the Rawson Property Group.
“The majority of South Africans are battling to make ends meet at the moment, but those who are homeowners are lucky in the sense that they are at least building up equity in their homes month-by-month as they make their bond repayments.”
Equity is the difference between the value of your home and the amount you still owe on your home loan, he explains, and while it should never be regarded as a substitute for actual savings, it does provide some financial protection in the event of a real emergency.
“It also happens to grow much faster if the value of your home is rising at the same time as you are paying off the bond, as does the potential ‘profit’ you are likely to make on your original investment in the property.
“If, for example, you purchase a R1 million property with a 10% deposit and the value rises by 5% in the first year, you will not only have added R50 000 to your equity in the property, but also made a 50% return on your original investment of R100 000.”
Indeed, says Rawson, one of most attractive things about investing in real estate instead of shares or other assets is that you generally only have to pay a small percentage of the purchase price yourself, but always get to keep 100% of the profit on the whole investment.
“However, there’s an old saying that you make the money when you buy a property, not when you sell it – which means that in order to maximise the profit potential of a real estate purchase, you need to seek out a home that is likely to show a substantial increase in value over the next five to 10 years and then try to buy it as cheaply as possible.”
Some vital things to remember while you’re doing this, he says, are the following:
- Make sure you buy a home in good condition. Renovations and repairs always take more time and money than you expect and tend to eat into the return on your investment, especially if you sell again relatively quickly. Besides, there’s always the danger with a fixer-upper of hidden defects in the plumbing and electrical systems, in the roof or in the foundations, and these are usually the most expensive problems to rectify.
- Don’t hesitate to negotiate. Even if you’re quite satisfied with the location and condition of a home you would like to buy, it never hurts to ask questions and see if you can’t better the price. If you can establish that the seller is moving to take up a new job, or has already made an offer on another home, for example, there will be some anxiety to finalise the sale and a lower offer might well be accepted.
- Consider buying a distressed property. Most of the banks have gone out of their way over the past few years to help homeowners who found themselves in financial difficulties and no longer able to afford their home loan repayments. And one of the most effective ways of doing this has been through their special “distressed seller” programmes. Certain estate agencies have partnered with the banks in these programmes, and while they would like to get the best possible prices, their main aim is to sell in the shortest possible time and the reality is that these homes usually do sell for less than current market value.
With some careful “shopping”, prospective buyers and investors can thus often acquire properties with good value growth prospects at reduced prices – or perhaps access areas they would not otherwise have been able to afford.
The information in this article is courtesy of www.property24.com
1. Property investment offers relative stability
Investing in the stock market can often bring forth great returns, but it is also very unstable and there is always a possibility that you will lose a lot of your capital. Experts advise that you balance your investment portfolio by choosing a relatively stable option and in South Africa, the property market is just one of these options.
2. Property shortage in South Africa
The country’s turbulent political past has left South Africa with a shortage of good housing and the government has made solving the problem a high priority. This focus on housing will result in a long-term structural growth potential within the South African property market, with people migrating to better neighbourhoods and more expensive homes set to continue for a long time to come.
3. Property cycles in South Africa
Many people dream of having their own property and the added sense of security and comfort of a continuously growing asset that goes with it. When young people leave school and first enter the working world, they enter the property cycle through renting a flat then buying one, selling it off and then buying a small house or townhouse. Over the years, they will become more financially secure and then will be able to invest in their dream property, which they are likely to sell once they reach retirement in order to move back into a smaller house or townhouse. The high demand for property in South Africa means that an astute investor benefits throughout the property cycle, as any investment is bound to provide high returns.
4. Stable vs unstable world
With the effects of 9/11 echoing throughout the globe, everyone has now become aware of how extremist attacks can have a profoundly negative effect on the economies and stock markets of the countries affected. Terrorism is a decidedly global problem, but when it comes to South Africa, experts are of the opinion that the country remains one of the least affected by extremist activities. This balanced position is proving the catalyst for property investment interest from abroad. The increase in foreign investment is certainly stimulating an already active economy.
5. High property rentals rate
A series of interest rate hikes and escalating inflation has caused an escalation in the number of people choosing to rent rather than buy property in South Africa. This means that the buy-to-let market is becoming an increasingly popular property investment option around the country, particularly in the bigger cities. Renting a property out will also help you to pay off your bond, while the value of the home steadily increases.
6. Top holiday destination in the world
The fact that holidaymakers put South Africa near the top of the list when it comes to prime holiday destinations means that the country is home to a picturesque landscape, both diverse and naturally beautiful. There is a location to suit any taste, from azure blue sea and sandy white beaches, to lush green winelands set in the mountains, extensive nature reserves and game parks with an abundance of wildlife that boasts the sought after Big Five and hundreds of bird species, as well as the ultimate whale watching and shark diving experiences. With so many visitors flocking to South African shores to take advantage of the excellent climate and endless natural beauty, who wouldn’t want to make this country their home?
7. Favourable exchange rate
If you are earning pounds, dollars or euros then you are leap years ahead of locals when it comes to the affordability of property in South Africa. More and more foreigners are seeing South Africa as the ideal property investment location, particularly in light of the favourable exchange rate, as well as the fact that the economy is the second strongest on the African continent. Even if you’re a local and don’t earn foreign currency, the fact that South Africa has such a strong economy means that you are guaranteed to yield excellent long term returns on your investment.
8. No tax on property purchases
The good news is that there is no VAT payable on property purchases in South Africa. However, the seller is generally liable for agent’s fees that incur a percentage of VAT. There is also no stamp duty on property purchases in this country, which means that buyers are sure to enjoy the added benefits. Another drawcard for the country as a prime investment location is the fact that there is no inheritance tax on property.
9. Tax breaks on property development
Real estate developers are given tax breaks of up to 20%, while another 20% tax break on rental is available for renovation projects. Consequently, the commercial property market in South Africa is currently outperforming markets in many Western countries. Even with the global economy experiencing difficulties, the commercial property development market in South Africa is booming.
10. High growth potential
It has already been said that the shortage of housing in South Africa and the government’s high priority to alleviate this problem means that the country has a high growth potential. The growth is also due to the development of a strong middle class, which is providing an increase in the demand for homes. In terms of facts and figures, the housing market in the Western Cape is showing a steady growth of 13.9%, while other metropolitan areas are growing at an annual rate of 15.6%. As we all know, a steadily increasing demand translates into high returns on a long term investment basis.
The information in this article is courtesy of www.propertyshowrooms.com