While buying a property in South Africa is relatively straightforward, there are certain practises of which a buyer should be aware. Below you will find a general overview of the home buying process in South Africa.
South African law allows non-residents to buy property without any restriction and most buyers will find the process similar to that of the UK. Most properties in South Africa are sold as freehold with an individual title, but properties can also be owned as sectional title or share block:
Non-resident property purchasers in South Africa can have confidence in their estate agent while most agents will act in their best interests during the buying process. They are governed by a strict code of conduct and must undergo a series of training courses before they are allowed to practise as agents. All brokers and agents must belong to the Estate Agent's Board, which strictly enforces the rules and regulations regarding buying and selling properties.
When the purchaser has found a property of their dreams, an offer will need to be made for the property. A word of caution here - once the agreement of sale has been signed there is no backing out of the deal unless some extraordinary circumstances come to light.
It is not usual to have a survey done in South Africa, but your agent can arrange one if you wish.
The agreement will deal with the following points:
The buyer's lawyer should also ensure that the seller has no other outstanding debts on the property prior to transfer.
A legally qualified conveyancer must handle the registration of a property and the costs are usually paid by the buyer, but can be split between the two. However if this is so, it must be stated in the agreement of sale.
All necessary documents for the transfer will be prepared and the title is then registered in the land registry. From the time of transfer, all former mortgages are cancelled and the new mortgage is registered.
Transfer duty is payable at the following rates:
No duty up to R500,000 of the purchase price
5% (R25,000) R500,001 - R1,000,000
from 8% R1,000,001
Apart from transfer duty, the range of costs will include lawyer's fees and mortgage arrangement fees. Buyers should allow an additional 5 to 8% of the purchase price when considering a property purchase in South Africa. In addition, if the property is new, buyers may have to pay for electrical and water installations. You should ask your builder to confirm this in writing before signing any agreement.
In any country, property owners will find they have to pay taxes and we advise you to consult a tax expert who has in depth knowledge of the system. Our tax experts can advise you on various ways to legitimately save on your tax bill while taking into account your particular situation.
Value Added Tax or VAT is charged only on agent's fees which are normally paid by the seller.
Property taxes are annual taxes that are paid to local councils for services such as garbage collection and sewerage installations and vary from according to region.
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