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What foreigners need to know about buying property in South Africa

If you are a foreign buyer or non-resident keen to invest in property in South Africa, this is what you should know.

Foreigners buying property in South Africa

Article summary

  • Foreigners buying property in South Africa can buy property here.
  • Foreign buyers or non-residents must comply with local legislation in that regard.
  • Consultants at ooba Home Loans, South Africa’s leading home loan comparison service, will be able to advise prospective foreign buyers on the home loan application process.

Investment in property can be as daunting as it is exciting, especially if you’re taking the plunge for the first time. Favourable exchange rates make buying property in South Africa very appealing for foreigners, also referred to as non-residents, so it’s important to know what is possible within the legal framework of the country.

Foreigners can invest in property in this country, within limits. Non-residents’ investments are not subject to South African tax. If foreigners investing in property in South Africa later sell that property and wish to transfer funds out of the country, the local tax laws of that country will apply.

10 of the most frequently asked questions by foreigners buying property in South Africa

1. Visa requirements

If you intend to stay in your South African property, you’ll need to apply for a visa, depending on your country of origin, the purpose of your visit and how long you plan to stay. This is assuming you don’t come from one of the countries that do not require visas for visits less than 90 days.

2. What impact does exchange control play when purchasing a property in your own name in South Africa?

The money you paid to buy the property and any profit made if you sell it can be repatriated. Capital Gains Tax will be deducted from that profit though. Make sure that your title deed is endorsed ‘non-resident’.

3. How do I enter into the agreement?

If you’re not in the country to sign the transfer or bond documents, you can sign them at the Notary Public, or later at the South African embassy.

4. Should I opt for a fixed interest rate or variable interest rate on my home loan/ mortgage?

The first thing you have to decide is whether you want a fixed rate or a variable rate product. Fixed rate mortgages will guarantee that the same interest rate will be applied for the duration of the agreement. This is usually in the region of between 6 months and 24 months (at best 60 months). You can also only opt to fix your rate after transfer has taken place.

Variable rate mortgages are more common than fixed rate products in South Africa and will have a more favourable interest rate upfront.

5. If the house I purchase stands empty for six months of the year – how do I protect it and what insurances are required?

Household insurance is a must, but because of the length of time the property is unoccupied, your premiums may be higher to cover the associated risks. Cover against loss or damage will also be affected. It’s important to check the terms and conditions of your policy and ensure that all the specified security requirements are met. These will no doubt include a radio-linked alarm system with armed response, burglar guards on opening windows and security gates on external doors.

6. This is my first time I am buying a property in South Africa – I hear about all the political turmoil and land expropriation without compensation – how do I make sure my property rights are safe?

It is best to check the state of play with your estate agent as regards land expropriation at the time of purchase.

7. If I take a mortgage for the property – what can I apply for and what are the terms I am likely to get?

Major banks will offer mortgages to foreign buyers under certain conditions. Non-residents may arrange finance for up to 50% of the purchase value, with the balance coming from foreign funds transferred to South Africa. Bank loans to foreigners are subject to the approval of the lending institution itself, and the South African Reserve Bank. The interest rate is subject to the bank’s risk policy and will be determined by the individual application.

8. Should I get a mortgage in the UK for a property in South Africa or is it best to get one in that country?

It is not currently possible to mortgage a South African property in the UK.

9. They want me to pay a deposit – how do I know that money is safe?

Your deposit should be safely held in an interest-bearing trust account where it will earn interest until the transfer of ownership goes through. While the conveyancing attorney or estate agent will charge an administration fee, this will usually be deducted from the interest earned and not the capital investment.

10. What documents do I need?

In most cases you’ll be expected to present the following:

  • Passport.
  • Proof of legal residence in South Africa.
  • South African reserve bank certificate that shows you’re eligible for the loan.
  • Documents that prove good credit, such as an international credit check or bank statements.
  • Documents that prove you can afford the mortgage, such as bank statements or utility bills.

If you are a foreign buyer or non-resident keen to invest in property in South Africa, this is what you must know.

South Africa’s leading home loan comparison service, ooba Home Loans, can smooth the way for foreigners interested in buying property in this country. They offer a range of tools that can make the home buying process easier. Start with their Bond Calculator, to get an indication of what you can afford. Then, when you’re ready, you can apply for a home loan.

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Effective 1 April 2018, by order of National Treasury, Value-Added Tax (VAT) will increase from 14% to 15%.

Please note that this increase will retroactively effect VAT-inclusive calculations in articles contained in our website.