How do Foreign Investors and Buyers Buy Real Estate in South Africa?

The 2010 World Soccer Cup is beginning to wind down, and South Africa will be returning to normal after a long and exciting run by all the international teams. However, the real estate market is as hot as ever—especially by foreign speculators. If you’re a newcomer to the South African market, there are a few things you need to know, such as: methods, acquisitions, lending practices, African laws, etc.



Some of the red tape, if you will

Thanks to the Aliens Control Act / Section 96 (1991), international investors and buyers can buy and sell real estate in South Africa. There’s a bit of red tape, however—but when it comes to investing, there’s usually no way around it. Read on:

Foreigners who are in the country illegally cannot own any estate that isn’t physically movable.

This also makes it easier for non-natives to acquire properties and sell them
Immigration Acts for South Africa mandate—that if you live in your home in South Africa, and are not a naturalized citizen—that you have to acquire either a temporary permit for residence or a permanent permit to live in the country. Officials enforce this law pretty tightly as well.

Getting the funds into the country and securing them

Any capital sent to S Africa for the reason of acquiring real estate can be transferred through most nominated banks and lending institutions. Usually, the account in which it’ll be paid into will be a realtor’s trust account. Doing business this way is usually 100% safe and secure, as there are S. African Boards that dictate a strict code of honor among realtors. Just don’t be scammed by a person claiming to be a real estate agent or realtor.

South African banks also lend money to non-citizens

As a matter of fact, S. African banks and lending organizations loan just as much money to international investors as they do locals so it's quite easy to get a mortgage approved. There’s just one stipulation for foreign buyers: that is that only half of the funds borrowed from an in-country bank can be used; the remaining money has to originate from a bank where you live or from another country.

Also, you’ll need to show prove to the S. African bank that you have a steady stream of income, and there’s a good possibility your credit and references will be verified as well. As long as South African laws and regulations are met, then you are then free to conduct business in this great country.

The tax man; he’s everywhere

Is he really? Most newbie foreign investors are curious about that in S. Africa; they want to know if any of their earnings are taxable as income. Of course, yes, you have to. On any property earnings you make on any South African estate, you’re responsible for paying the country’s income tax. For example: you rent out a small dwelling in Johannesburg and you intend to reap the payments. A cartage percentage has to be paid in taxes.

Alas, there are many more items that you have to contend with when investing in S. African real estate. Some of them are like the nuisance of paying income tax, and some work more to your advantage. With the laws and regulations in a state of continual change, you have to play the game by the rules—and how can you play the game without knowing the rules? South Africa, though, has an extremely lucrative real estate market; there are countless investors and residents that have made very handsome returns. Could you?