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Nov 20, 2006

Buying costs are high


How high are realtors’ and lawyers’ fees in the South Africa? What about other property purchase costs?

Transaction Costs

Who Pays?
Transfer Duty 0 - 8% buyer
Lawyer’s Fee for Conveyance ZAR1,250– 36,000 (US$178- 5,135) (+14% VAT) buyer
Registration Fee ZAR55– 1,000 (US$8- 143) buyer
Agent’s Fee 7.5% (+14% VAT) seller
Costs paid by buyer 0.35% - 15.8%
Costs paid by seller 8.55%
ROUNDTRIP TRANSACTION COSTS 8.9% - 24.35%
See Footnotes
Source: Global Property Guide

South Africa luxury homes for saleHow difficult is the property purchase process in South Africa?

Foreigners can own and register a mortgage on immovable property in South Africa without restrictions. Loans to legal aliens of up to 50% of the purchase price are available from South African financial institutions. To ensure repatriation, all foreign funds remitted to South Africa must be declared and documented, and the property must be endorsed ‘non-resident’.

South Africa boasts a first-world property registration system that is guaranteed and secure; conducting property surveys is unusual. For peace of mind, one may freely access records of the property interest at the office of the Registrar of Deeds.

The South African property market is dominated by a few estate agents, while private sales are rare. By law, the agent is obligated to prepare a written letter of offer. This will be submitted to the seller for approval. Both parties must sign upon acceptance. At this point, the letter of offer effectively becomes an Agreement of Sale that is legally binding to both parties. Payment of a 10% deposit is usual.

The seller then appoints a real estate attorney (conveyancer) to handle the formal processes of transfer. Your identification documents must be submitted for the registration procedure conducted at the Deeds Registry. This, and the settlement of all the government duties, is usually accomplished in six to eight weeks.

South Africa beachfront housesWhen the buyer’s name has been recorded as the new owner, the remaining balance must be paid. The conveyancer will be responsible for delivering the title deed to the new owner.

The conveyancer’s fees and registration fees for the Deeds Office are fixed and can be determined according to the table from Ghost Convey. A 150-square metre apartment in the central business district of Johannesburg costing around US$300,000 (ZAR2,165,217) will be levied a ZAR260 (US$37) registration fee. The corresponding conveyancer’s fee is ZAR4,400 (US$628), subject to a 14% VAT of ZAR616 (US$88).

 




Footnotes to Transaction Costs Table


The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Transfer Duty:
The buyer is liable to pay Transfer duty on the fair market value of the purchased property. Transfer duty for a property bought by an individual is computed as follows for tax year 2006-2007

TRANSFER DUTY

VALUE OF PROPERTY, ZAR (US$) MARGINAL TAX RATE
Up to 500,000 (US$71,327) nil
500,000 – 1 million (US$142,653) 5% on band over US$71,327
Over 1 million (US$142,653) 8% on all value over US$142,653
     





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