Buying property in South Africa – Foreign Investment

Owning a property in a foreign country is a viable investment opportunity for anyone who has found a favourable location and is willing to invest a significant amount of money in the venture.The process of buying international property is relatively easy and rarely involves more than a little extra paperwork to buying in the country in which you reside.

Buying property in South Africa is popular amongst international investors as it is an appealing destination. South Africa has a variety of properties to offer, set amongst diverse scenery that is world famous. The country is becoming better known around the globe as an emerging country. As just one example, the upcoming FIFA World Cup tournament in 2010 has attracted a lot of international attention towards the country.

South Africa has become a very popular destination for foreign investors to purchase property in as it is a favourable getaway destination with worthwhile investments. Property values in the country are extremely agreeable and the cost of living is relatively low. Whilst South Africa has just entered a recession, the economy has remained comparatively stable and interest rates have dropped significantly since December.

How to buy property in South Africa
The process of buying property in South Africa is reasonably simple. Overseas investors who are not citizens or permanent residents are welcome to purchase real estate in the country. The only restriction placed on overseas property investors is if they have a criminal or terrorist record or are illegal aliens (citizens of another country who are in South Africa illegally).

It is advisable to travel to South Africa a number of times before purchasing a property. Investors need to find a location which they are truly happy with, followed by a property in this location to suit their requirements. This is a process which can take far longer than a few weeks. Potential investors can get a real “feel” for South Africa and the country’s way of life when they have travelled to the country extensively.

Taking several trips to South Africa will also help with the preparations necessary for a successful and hassle-free purchase. An investor will need a conveyancer with whom they will need to build a relationship. A conveyancer will deal with all legal matters such as the Agreement of Sale and the transfer procedure. Similarly, investors will need to find a real estate agent who understands every detail of what the investor is looking for.

If investors do not wish to buy property in their name, it is perfectly legal for a purchase vehicle to be used, as long as it is registered locally and complies with South African company laws. An overseas company or trust is also allowed to buy property in their own name. Transfer and bond documents do not need to be signed in South Africa; these documents can be signed at a South African Embassy or witnessed by a notary public.

Raising a bond in South Africa
Anyone buying property in South Africa whose domicile (place of residence) is not in the country is considered a non-resident. Overseas investors looking to buy property who are not residents can raise a bond in South Africa of 50{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the value of the house. Records of earnings will need to be provided as proof that the buyer can afford to pay the monthly instalments.

Transferring funds into South Africa is a safe practice and regulated by professionals. These funds can be transferred into any South African bank account when making the purchase. This account can be the seller’s own private account or the trust account of the attorneys dealing with the sale.

It is normal practice for an overseas property owner to open up a special bank account for foreigners in South Africa to service repayments on their bond. FICA (the Financial Intelligence Centre Act) is a mandatory investigation into the origin of the funds used to purchase the property. All major financial matters in South Africa must be investigated to see whether the funds have been appropriated legally or not.

Foreign investors may worry that they will need to pay income tax on their overseas earnings when they own property in South Africa. This is not the case – foreign residents only pay income tax on money earned in South Africa.

Repatriation – selling overseas property
International investors should always be aware of what will happen if the time comes for selling their property. Repatriation of the funds resulting from the sale of the property is very simple. The balance of the amount owed on the property needs to be paid in full through the processing of the sale and the original Deed of Sale will need to specify that the international investor is a non-resident of South Africa. The money that is left remaining after paying off the bond can be repatriated.

Any money which has been repatriated will be taxed under Capital Gains Tax. This is a tax for any increase in the value of assets such as a house. In South Africa, a non-resident will pay a comparatively low amount of Capital Gains Tax. A property owner who was previously a non-resident and is now a permanent resident may not repatriate funds until they have been a resident for a minimum of 5 years.

Buying property in South Africa is a worthwhile investment for overseas investors. The reasonable property values, eclectic choice of real estate, friendly people and beautiful surroundings make the country a world-favourite for buying property.