Non residents are free to purchase property in Cape Town, South Africa. In fact, many of our clients who purchase property in Cape Town do so as an investment, holiday home or future retirement property.
Property finance is also available to non-residents. They can finance a property in Cape Town for up to 50% of the purchase price of the property. However, the other 50% needs to be paid in cash from a foreign bank. A non-resident is allowed to rent out the property to generate a rental income.
What costs do I have to pay when purchasing a property in South Africa?
There are 3 main costs to consider when purchasing property in South Africa
- The cost of the transferring attorney who will be transferring the property into the names of the purchaser and managing the transfer process.
- The cost of the Transfer Duty.
- The cost of obtaining property finance, which includes the bond registration costs and the attorney.
How much is Transfer Duty?
The Transfer Duty in South Africa varies depending on the entity you are purchasing the property in and the purchase price of the property.
If you are purchasing a property in your personal name, the costs range between 5 to 8% of the purchase price. (This amount does include the cost of the transferring Attorney.)
Example: Purchase Price R 2 500 000.00
Transfer Costs R 164 000.00
If you are purchasing the property in a Trust, CC or any company, the costs are between 8-10% of the purchase price. (This amount does include the cost of the transferring attorney.)
Example: Purchase Price R 2 500 000.00
Transfer Costs R 227 000.00
Please note that the Transfer Duty / costs do not include the costs involved in obtaining finance on a property.
How long does it take to buy property?
Once you have selected a property in South Africa that you would like to purchase and the offer has been accepted, the transferring process can move ahead quite quickly. Usually it takes between 6 weeks to 2 months to transfer the property into the purchaser’s name. However if there are conditions on the offer to purchase that need to be fulfilled, the process can take a lot longer – up to 3 to 6 months depending on what the conditions are.
What happens if I change my mind?
Once an offer to purchase has been signed by the purchaser and accepted by the seller you cannot cancel the agreement. You cannot change your mind at a later stage. If you try and cancel the contract or breach the offer to purchase in any way, you can be sued for damages by not only the seller but the seller’s agents too.
How do I know that the property is a good buy and there are no major faults with it?
In order to know that the property is a good buy, you need to know the area very well and have a good knowledge of the selling prices of the properties in the area. It is not the responsibility of the seller to ensure there are no faults on the property – it is the responsibility of the purchaser to inspect the property and ensure there are no major faults. It is best to get an expert to advise you on these issues.
How much should the deposit be?
The deposit is usually 10% of the purchase price. This deposit is held in an interest-bearing trust account and the interest is for the benefit of the purchaser. However, it is not compulsory to pay a deposit on a property.
Will I be taxed on any income from letting my property?
Yes, you will be taxed on the rental income from your property and it is best to get the advice of a tax expert on this issue to assist you.
Will I be taxed (Capital Gains) on any profit I make?
You may have to pay capital gains tax on profit you make when you sell your property. There are certain exceptions that may apply – such as whether it is your primary residence or not – but these will depend on your personal circumstances. It is best to get a tax expert to advise and assist you.
Will I be able to transfer my money back abroad if I sell my property?
Yes, in most instances you are able to transfer your money, including any profit that you have made, back overseas once you have sold your property. However, first you may need to pay the capital gains tax and you must be able to prove that the money you purchased the property with came from abroad.
What is involved in buying a guest house?
When purchasing a guest house, you will have to follow the same procedures as purchasing any property in South Africa. However, if the guest house is being sold as a business, then it is best to ensure that you get a copy of the financials so that you can establish whether there is any value in the amount allocated to the business side of the guest house.
Most of the guest houses sold very often include the furniture, linen etc, so it is best to have a written inventory of the items included. This inventory must form part of the offer to purchase. It is also advisable to insist on getting written permission to run a guest house from all of the neighbours, even if the property has been running as a guest house in the past, as all new owners have to apply for a name change on the guest house departure.
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