April 21, 2023

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Non-residents purchasing property in South Africa:  Financial assistance and costs

Non-residents purchasing property in South Africa:  Financial assistance and costs

In our previous article last month, we wrote about what non-residents need to know about Exchange Control and tax information when purchasing property in South Africa. This month we are concentrating on what South Africa offers in terms of financial assistance for non-residents and what costs are involved in purchasing property in South Africa as a non-resident.

Foreigners are referred to as non-residents, whether they be natural persons or legal entities whose normal place of residence, domicile or registration is outside the common monetary area of South Africa.

Property can be owned individually, jointly in undivided shares or by an entity such as a company, close corporation or trust or a similar entity registered outside South Africa.

There are certain procedures and requirements which must be complied with and this article provides some insight into foreigner bond registration and costs for foreigners purchasing property in South Africa.

Foreign buyers financial assistance

While South African residents can apply to a financial institution for up to 100% of a bond or mortgage – there are certain restrictions on non-residents wishing to purchase property in South Africa. The non-resident may borrow up to a maximum of 100% of his/her borrowing base. The borrowing base of a non-resident individual is the sum introduced into South Africa to fund the purchase of a property, i.e., 50% of the purchase price.

For example, a non-resident wishes to purchase a property in South Africa for ZAR600,000.00. Provided ZAR300,000.00 is introduced into South Africa to affect the purchase, he/she would be able to apply to the South African Reserve Bank for permission to avail himself/herself of a bond of ZAR300,000.00. In other words, banks will lend up to 50% of the purchase price, subject to their normal terms and conditions.

These non-resident loans are however subject to foreign exchange approval from the South African Reserve Bank. Financial assistance is granted in the form of a loan secured by a mortgage bond to be registered in favour of the bank granting the loan. The obtaining of financial assistance from a financial institution should be included in the Agreement of Sale as a suspensive condition where the sale is subject to the receiving of financial assistance.

The financial institution is required to adhere to Exchange Control regulations as imposed by the South African Reserve Bank requirements.  To meet the South African Reserve Bank’s Exchange Control requirements, and to consider the application to purchase property in South Africa, please note the following:

  • The customer will be required to finance and invest 50% deposit of the purchase value of the property upfront.
  • This 50% deposit must originate from foreign funds transferred to South Africa by the client concerned.
  • Proof will be required reflecting the deposit was transferred to South Africa, from foreign origin. (*Proof of SWIFT is required).
  • Details of the attorney’s account will be required where the 50% deposit is retained or will be retained.
  • Proof of the deposit made to the attorney’s account is required in the form of a bank statement and must accompany the application to Exchange Control.
  • A confirmation letter from the attorney stating the purpose and amount of funds retained in their account. The confirmation letter must also state the property description for the property being purchased.
  • Details of banking account where payments for the home loan will be made from.
  • Completed customer Declaration form.

*SWIFT code is a standard format of unique identification code for a particular bank used when transferring money between banks, particularly for international transfers.

The non-resident does not have to open a banking account in SA with a commercial bank, although some banks insist, as he/she can transfer funds directly from his overseas account into his Mortgage Account. If an account is to be opened, especially if an access facility is required for the capital paid off, then the non-resident is required to obtain an original letter of credibility from his bankers. This local account will often be funded from abroad or from rental income from the property purchased, subject to the bank holding the account being in possession of a copy of the rental agreement.

As Exchange control is a complex subject, non-residents are advised to consult with our expert FX team to assist with this process.

Foreign buyers cost information

In South Africa there are additional costs that a property purchase incurs. These include transfer duties, bond registration costs and conveyancing fees.

Transfer costs

The purchaser is responsible for the payment of transfer costs and the costs of registering any new mortgage bonds over the property purchased. Transfer costs include transfer duty and conveyancer’s fees. Transfer duty is calculated as a percentage of the purchase price and varies depending on the purchaser’s legal status. Conveyancers’ fees, charged by the attorneys for attending to the transfer and registration of mortgage bonds, are calculated according to a tariff.

Bond costs

Bond costs are the costs incurred for raising mortgage finance. Mortgage registration fees according to prescribed tariff are payable to the registering attorney.

NOTE: the above figures are subject to change; enquire with your tax, bond &/or real estate consultant.

Whether you’re thinking of buying your dream home in South Africa or abroad, or simply need to make a foreign currency transfer, Currency Partners gives you access to the best pricing and service available in the market so you can make significant savings and enjoy the experience. 

To speak to an expert in our specialist team, email enquiries@currencypartners.co.za or call us on +27 21 203 0081.

We look forward to partnering with you and saving you time and money.
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