South Africa: Overview

RENTAL YIELDS

Excellent yields in Johannesburg at 8.25%

Johannesburg yields on apartments are at an average of 8.25%. Three-bedroom apartments have lowest yields at 7.24%. Selling prices range from US$100,000 to US$270,000 for one to three bedrooms, with an average of US$178,696. Houses of three to more than five bedrooms sell at an average of US$649,508, from US$460,000 to over US$800,000.

Apartments in Cape Town have much lower yields at an average of 4.57%, dropping up to 2.98% for three-bedroom apartments. Smaller apartments generate higher yields.

However, Cape Town apartment prices are much higher than Johannesburg, starting at US$136,119 for studio apartments. A three-bedroom apartment in Cape Town costs more than double.

There are no rental figures available for houses in both Cape Town and Johannesburg.

Read Rental Yields  »

TAXES AND COSTS

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 ZAR74,000 (US$10,253) is taxed at 18%. Marginal tax rates rise progressively to 40% for annual income beyond ZAR270,000 (US$37,410).

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 ZAR2,500,000 (US$356,633).

Residents: South Africa has taxed residents on their worldwide income since March 2001.

Read Taxes and Costs  »

BUYING GUIDE

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.

Read Buying Guide  »

LANDLORD AND TENANT

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.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Strong post-Apartheid economic growth

Until 1994, South Africa was the only country ruled by an ethnic minority, aside from Israel.

Whites made up only about 10% of the population and yet they ruled over the 77% blacks, 8% colored (people with mixed ancestry) and the 3% Asians. There was a complex system of segregation and discrimination policy called apartheid. Blacks had no representation in the national government and could not vote in national elections.

After decades of armed struggle and conflict, the 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.

South Africa is Africa’s superpower and has the continent’s biggest economy (pop. 45.3 million, GDP/cap US$5,400). It plays a leading role in diplomatic and anti-poverty initiatives in Africa. Mbeki has mediated in conflicts in Ivory Coast, Burundi and Dem Rep. of Congo.

South Africa 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.

However, the effects of apartheid cannot be erased overnight. About 34% of the population lives below the international poverty line of US$2 a day. Average unemployment rates from 2000 to 2004 remain high at 28.4%.

South Africa also has the second highest number of HIV/AIDS patients in the world. Although the share of population with HIV fell from 20.9% in 2000 to 15% in 2003, the proportion of women with HIV rose to an alarming 57%.