Buying
Property
in South Africa
When apartheid ended in 1994, the
tourism industry in South Africa began
to boom and visitor numbers grew
dramatically. Tourists soon became
mesmerised by the country’s beautiful
scenery and outdoor way of life and
many people ended up purchasing
property for either investment or lifestyle
reasons.
Since the 2010 World Cup, property
prices have stalled slightly and overseas
interest has remained quite low.
However, following the death of Nelson
Mandela and the release of his biopic
film “Long Walk to Freedom”, the country
is again gaining positive attention, which
should hopefully once again boost
tourist numbers and in turn, the property
market.
South Africa was under British rule
from 1910 until 1961 when it became
a republic. Since that time it always
retained close links with the UK and
the influences are still clear to see with
the two countries having similar style
banking systems and the SA political
system based on a Westminster style
government.
The main difference is the weather, with
South Africa enjoying an average nine
hours of sunshine a day. The cost of
living is also a lot lower in comparison to
the UK, meaning your money goes much
further. A further benefit is the attractive
exchange rate when converting sterling
into the local Rand currency, currently
above 17 to 1.
“There are no restrictions in place for
non-residents who want to purchase a
property in South Africa and banks are
currently willing to lend applicants a
maximum loan to value of 50 per cent on
a residential property and vacant land.
If you are purchasing a property jointly
with a South African resident then banks
may even be willing to lend you up to a
72
maximum of 75 per cent. As a nonresident it is not essential that you open
a South African bank account, but some
bank mortgage terms insist you do this
as it would then facilitate the transferring
of funds and monthly repayments of the
loan. ” says Simon Conn an expert in
overseas property finance.
As a foreign investor when purchasing
a property you will need to provide
proof that the funds for the deposit have
physically entered the country (this can
be done through the Attorney at Law
(Solicitor) who will be dealing with the
matter), so that when the property is
sold, the deposit plus any profit can be
released to the country of origin.
South Africa has a world class legal
system with its Private Law based on
Roman-Dutch law principles. During the
time of British rule this was influenced
by the courts through the appointment
of some English trained judges. As there
are so many differences it is advised
that you seek independent legal advice
during the buying process, as the
process is far from similar to England
and Wales.
Martin Lamprecht is an associate
solicitor at Mayo Wynne Baxter but is
also a South African attorney at law
maintaining close professional links with
South African law firms. He has retained
his South African qualification and gives
a brief outline of the process of buying
follows.
“The seller appoints the Attorney
who will be dealing with the matter
of the transfer of the property. The
buyer however has to pay the seller’s
Attorney’s fees, transfer duty (a Form
of Stamp duty) and disbursements. The
reason behind this is that Conveyancing
is regarded as non- contentious and it
is mainly the seller’s interest that needs
protection.
There is only one version of the contract
and as soon as this is signed by both or
all parties a binding agreement comes
into place. There is no exchange of
contracts procedure. Most of the time the
estate agent dealing with the sale will
draft a standard type contract and obtain
all parties’ signatures thereto and as you
can expect the estate agents would like
to get the contract signed as soon as
possible to ensure they have agreed the
sale.
Once the contract is signed and
unless there are suspensive conditions
(meaning the contract comes into effect
only if the conditions are met) contained
in the contract you cannot simply
withdraw from the contract. So my advice
is to consult with a qualified South
African attorney at Law before you enter
into any contract to buy or sell with any
estate agent or otherwise.
The contract will have a date agreed
from which you can move into and
start to occupy the property. This is not
the equivalent of what we understand
as completion and does not transfer
ownership. Normally a rent is agreed and
payable from the date of occupation until
registration at the South African Deeds
Registry (Land Registry equivalent).
Sometimes it is agreed that the seller
stays on in the property after registration.
Ownership of the property only passes
to the buyer on registration of the
property in his or her name at the South
African Deeds Registry and in South
African law the registered proprietor is
deemed to be the owner thereof. For this
to happen, the Attorney has to appear
in person before the Registrar of Deeds.
Payment of the purchase price is only
transferred against registration.”
By Jason Edge