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Buying Real Estate in South Africa

One of the most beautiful and diverse countries in the world, South Africa is known for its ravishing landscapes and stunning wildlife. It is one of the most popular places for nature lovers, with an abundance of mountains and endless miles of pristine, unblemished beaches. A vibrant night life, fine wines for connoisseurs, and a wide range of cuisines for the gourmet makes this place a tourist’s paradise.

South Africa is located on the southern tip of Africa with a coastline stretching more than 2,500 km. The country is semi-arid in most places, but the climate and the topography vary considerably across the length of the country. It is unanimously accepted that no other country comes any closer to South Africa when it comes to natural beauty, rich culture, and friendly inhabitants - making it one of the best place to enjoy a holiday, retire, or settle permanently. The climate is pleasant throughout the year. A wide variety of properties is available at good, reasonable rates.

Attraction for Foreign Investors and Buyers

There are a few crucial questions that you need to get addressed before investing in a property or home in South Africa. Buying a holiday home or a permanent residence are two entirely different issues and entail meeting different criteria. Despite the reservations, the South African property market has been attracting foreign investors looking to get a second home in a foreign country. They are attracted by the low cost of living, developed infrastructure, good banking and shopping facilities, and excellent transportation. The fact that South Africa is present in the same time zone as the UK is another reason for the dominance of English tourists and settlers over others. Another reason is that the South African currency, the Rand (ZAR), converts well to European, American and British currencies – making it more than affordable for foreigners.

The real estate rates have still not taken off the way they have in many European countries. However, the rise in rates is slow, steady, and firm. Huge rate fluctuations are not a norm here. Surveys show that property rates have more than trebled over the last 10 to 12 years, making property an attractive and reliable investment vehicle. Real estate markets have witnessed a lot of buoyancy since the start of the twenty-first century.  The average percentage increase in property rates since 2001 has been around 14.2 percent.

Rates are on the higher side in areas like Cape Town and the Garden Route. These areas are favored by European settlers, giving them easy access to the best wines and leisure facilities. A mild climate and the presence of large number of expats in the area is another reason why foreigners like to make Cape Town their second home.

Cape Town—Offers Huge Potential for Investment Appreciation

Cape Town is regarded as “The Mother City of Africa.” The Western Cape would easily beat any other place as the most beautiful region in the world. It is like a rare cultural jewel, with settlers from a multitude of countries and local tribes like the Bushman and Bantu co-existing peacefully. It is an ideal holiday destination, being a city of culture built on a history that is predominant in its architecture, cuisine, music, and dance. Luxury villas with a great view of the ocean, apartments, and traditional Cape Dutch houses are available for investment. You may have to pay as much as 35 percent more to buy a property here than in other areas in South Africa. Yet, it is considered a good place to invest, with potential for good appreciation of value. 

The Garden Route—Nature at its Very Best

 The Garden Route stretches from Cape Town to Port Elizabeth in the Eastern Cape. It looks like a theme park created by God’s own hands and stretches along the coast. The Garden Route is a rich tapestry of deep gorges, freshwater lakes, and towering trees. There is no doubt that the nature rules here.

It has everything from tiny villages to outstanding resorts, a Mediterranean climate, nature in its full, uninhibited glory, and excellent staying and recreation facilities for tourists. The Garden Route towns have many airports and it is also well connected with the outside world by well-developed roads.

As it is primarily a tourist center, rental rates are exorbitantly high. Real estate rates are also much higher than the average South African index. Mossel Bay, George, Knysna, and Plettenberg Bay are some of the best places for real estate investment, assuring attractive returns in the long run.

Private Estates—Home for the Elite

Another area where real estate investment is catching up is private estates. Places like golf estates, wine estates, and equestrian estates are an attractive investment preposition. The projects here are all high-end properties, with investors being able to enjoy 24-hour security and the latest in amenities. One of the biggest advantages of investing in a private real estate is the assured returns, even on resale and consistently huge appreciation. Golf estates offer the best return on investment.

South Africa has one of the best deed registration systems in the world. Foreign investments have shown appreciable growth, due to which a proposed moratorium on restricting foreign investment in real estate has been put on the back burner by the government. Experts believe that this has had the desired effect of reigning in the spiraling real estate prices.

Buying Real Estate in South Africa—The Process

Most properties in South Africa are freehold and are sold through estate agents. The buying process is simple and straightforward. Legal costs can exceed your expectations, though. An Offer to Purchase or an Agreement of Sale is a contract through which real estate deals are affected. Once the contract is signed by both the buyer and the seller, it becomes mandatory to honor the agreement, failing which stringent penalties are imposed. Unlike other countries, a deposit is not obligatory.

The additional charges incurred by the purchases includes transfer fees, conveyance fees (2 percent), transfer tax (a government-levied charge—usually, a percentage of the purchase price, which varies between 5 percent and 8 percent depending on the legal status of the buyer).

While paying cash upfront is the best option to close a sale, it may not be possible for everyone. Financing options are available from UK lenders who can provide you a loan of up to 80 percent of the total cost for a 15-year term. Non-residents who wish to become permanent residents can avail 100 percent finance from local lenders and institutions. Otherwise, only a 50 percent loan is permitted by the law. Professional advice on financing your purchase can help you make an informed decision.

Know Your Taxes

The taxation system is diverse and complex. Income tax, capital tax, value-added tax, and many duties like stamp duty, custom and excise duty are levied. Residents and non-residents are taxed differently. Property and local taxes are undergoing some major reforms to address the various structural issues.

Buying property overseas is a decision that requires immense research and knowledge of the local rules and regulations. As a huge amount of money is involved, expert guidance at every level can help in making the right move. Legal and taxation issues must handled by professional consultants to avoid problems at a later stage.
But when all those issues are solved and in place, there is no better place to appreciate life than in the vibrant ‘Rainbow Nation’.