South Africa: Overview

RENTAL YIELDS

Last Updated: Sep 12, 2008

Highest yields in Johannesburg

Johannesburg yields on apartments are 13.25% for two-bedrooms. Selling prices range from US$85,000 to US$174,000 for one to three bedrooms, with an average of US$127,843. Houses on the other hand, ranging from 120 to 520 square metres, sell at the starting price of US$ 115,000S to US$530,000, with an average rental yield 24.33%. (For available figures).

Apartments in Cape Town have much lower yields at an average of 5.02%. 120 square metre apartments have the highest yields of 6.32%. Rental yields for a 3 bedroom house in Capetown are poor at 3.97%

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TAXES AND COSTS

Last Updated: May 15, 2009

Rental income tax is high

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	7.2%	15.8%	20.1%
Click here to see a worked example
Source: Disclaimer

Rental Income: Annual rental income below ZAR132,000 (US$16,440) is taxed at 18%. Marginal tax rates rise progressively to 40% for annual income beyond ZAR490,000 (US$62,742).

Capital Gains: Capital Gains Tax (CGT) is calculated by adding 25% of the capital gain to the individual’s income for that year, and taxing that income at the individual’s marginal rate of income tax. This curious manner of calculating CGT means that the maximum tax rate applicable is approximately 10% of the capital gain.

Inheritance: Estate duty on inheritance is levied at 20% of the dutiable amount of the estate. The dutiable amount is the value of the estate, minus ZAR3,500,000 (US$435,918).

Residents: Since May 2001, residents are taxed on their worldwide income at progressive rates, from 18% to 40%.

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BUYING GUIDE

Last Updated: Nov 20, 2006

Buying costs are high

Total roundtrip buying costs are between 8.9% and 24.35%, inclusive of the 7.5% estate agent’s commission (plus 14% VAT). Six procedures are involved in registering a property transfer, completed in about 20 days.

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LANDLORD AND TENANT

Last Updated: Jul 03, 2006

Pro-landlord laws

Rental market laws in South Africa are pro-landlord.

Rents: The passage of the Rental Housing Act [No.50 of 1999] marked the end of rent control which had been in place since 1976. This paved the way for the entry of investors to the buy-to-let industry.

Rent Tribunal: If the tenant feels that the rent is too much, he can file a protest with the Rent Tribunal. However, only three of the nine provinces have established such tribunals, to the advantage of landlords.

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ECONOMIC GROWTH

Last Updated: Jul 14, 2008

Slower post-Apartheid economic growth

South Africa is Africa’s superpower and has the continent’s biggest economy (pop. 47.4 million, GDP/cap US$5,906). It has formidable manufacturing and financial sectors. It is the world’s largest producer and exporter of gold and platinum. Tourism is also a key source of foreign exchange.

After decades of armed struggle and conflict, the white dominated Apartheid government bowed out in 1994 giving way to full democracy. The African National Congress (ANC), which led the struggle against apartheid, won the first non-racially based election with Nobel peace prize winner Nelson Mandela becoming the first black president. Mandela stepped down in 1999 to give way to Thabo Mbeki, another key ANC figure.

Jacob Zuma is the next in line for presidency as Mbeki is set to step down in 2009. As the current leader of ANC, Zuma has a good chance of winning the presidential seat. However, with charges of corruption against him, the credibility of the presidency could in some ways be compromised.

South Africa’s strong economic growth is expected to stall in 2008 due to several factors including power outages, continuing inflationary pressures and interest rate hikes. Real annual GDP growth is expected to fall to 3.9% in 2008 from 5.1% in 2007 and 5.4% in 2006.

Blackouts have been frequent due to energy supply shortage. On the back of surging food and energy prices, inflation has been continually increasing since 2006; from an annual average of 4.7% in 2006, it went up to 7.1% in 2007 and 11.7% in April 2008. Key interest rates have been raised 9 times from 7.5% in mid-2006 to 12% in June 2008 to quell inflationary pressures.