Buying property in Cape Town
Reasons for buying property in Cape Town
Buying property in South Africa can be a very good investment, as property prices are constantly rising and the exchange rate (due to the devaluation of the Rand) is favorable to people who buy in foreign currency. The holder of the account to which the transfer is made has one month to release the payment, which also allows him to choose the best exchange day.
Even if the real estate market is the most expensive in the country, buying a property in Cape Town is a very good investment. The demand for tourist rentals is very high, and many expatriates rent their homes on a short-term basis but at a very good price when they leave the country for their vacations, and if this possibility is considered, the location of the property is essential: sea view and proximity to beaches, etc.
It is important for the future buyer, before starting to search for a property in Cape Town, to target the neighborhoods where they plan to buy because the area is just as important as the property itself: security and traffic are the two major points to take into account.
Before embarking on a real estate purchase in Cape Town, it is important to keep in mind that the procedures differ from those of the country of origin and to know all the legal aspects. Additional fees can represent up to 10% of the purchase price. In addition, the interpretation of the texts of the contracts, which are written in English, can sometimes lead to confusion.
The agency fees in South Africa are to be paid by the seller, and therefore, the real estate agent will do everything to preserve the seller's interest.
It is preferable to be assisted by an independent expert, who not only knows the city and the market prices, the laws, the real estate agencies and who will be able to advise, to put in contact with serious real estate agencies, to take care of the negotiations and the transactions.
Finding the perfect neighborhood in Cape Town
The metropolis of Cape Town is divided into six main districts or suburbs, each of which has different characteristics due to their proximity to the sea or the mountains, the population that lives there, the architecture...
The 6 districts or suburbs are:
- The City Bowl (downtown), composed of the CBD (Central Business District), Oranjezicht, Vredehoek, Gardens, Devil's Peak and Woodstock.
- The southern suburbs, including the districts of Newlands, Rondebosch, Claremont, Mowbray, Rosebank, Observatory, Kenilworth, Bishopscourt, Constantia.
- The west coast with the districts of Bloubergstrand, Melkbosstrand, Milnerton and Table view.
- The Atlantic coast, starting at Green Point, passing through Sea Point, Bakoven, Bantry Bay, Clifton, Camps Bay, Llandudno to Hout Bay.
- The northern suburbs with Belleville, Durbanville, Century, Edgemead, Parrow and Parkland.
- The Peninsula or deep south with Muizenberg, Fish Hoek, Kalk Bay, Simon's Town, St James and Scarborough.
Once you have chosen a neighborhood, you are advised to visit it at various times of the day, talk to the residents to get their point of view, and go to the police station to find out about the problems you may encounter in terms of security.
Quick and easy purchase in Cape Town
Buying a property in South Africa and thus in Cape Town is much simpler and faster than in many European countries: no promise to sell, no compromise, no delay of withdrawal, etc.
Any foreigner can buy a property in South Africa as long as they are in the country with a valid visa at the time of the purchase, whether it is a tourist visa, a temporary or permanent resident permit. They are not obliged to reside in the country.
Once the property is found, the potential buyer will make an offer to purchase by a letter specifying the desired date of entry into possession, the proposed price and other conditions if necessary. After acceptance by the seller, both parties sign the letter which is equivalent to an agreement to sell. The seller must provide a copy of their identity card (if they are not South African, there will be additional taxes to pay), an Electrical Compliance Certificate, proof that all municipal taxes are paid (Clearance Certificate) and a Borer Beetle Certificate.
A security deposit of 10% of the purchase price must be placed in an escrow account. Once all these formalities have been completed, the notary will hand over all the documents to the land registry (Office Deeds), which will register them, and the transaction is completed. The transfer of ownership usually takes one month.
You can buy a property in your own name or by setting up a company in South Africa (Pty) and buy the property in the name of the company (which allows for lower transfer taxes).
If you are buying in your own name and you are married, it is preferable to buy in your name and your spouse's name in order to avoid paying Transfer Duty in the event of the death of one of you.
The laws change regularly, so it is best to be assisted by a lawyer specializing in the acquisition of property by foreigners or by a real estate buyer consultant.
In the event of the resale of a property in South Africa, foreigners may repatriate the initial capital invested as well as the capital gain realized after paying the capital gains tax of 33.30% less the deduction of certain expenses.
If a foreign owner decides to keep the property as an investment and rent it out, this is possible. Rental income is subject to income tax.
How to find a property in Cape Town?
Property sales in South Africa are generally made through real estate agencies. In Cape Town, as in all major cities in South Africa, there are real estate agencies that specialize in selling properties to foreigners, such as SA Homes Buyers, and immigration service companies, such as Intergate Immigration Service, can also handle property searches and transactions. Visits are made on Sunday afternoon by appointment (show house). Agency fees are paid by the seller, while transfer duty (5-8%) and conveyance fees (based on a schedule) are paid by the buyer.
Foreigners can obtain a mortgage loan of up to 50% of the purchase value of the property, but loans to residents and non-residents must be approved by the Reserve Bank of South Africa. Interest rates on bank loans are very high (around 7%).
What is the budget for buying a property in Cape Town?
Property prices in Cape Town vary from one neighborhood or suburb to another, depending on the distance from the city center, the public transport service, the level of schools in the area, the proximity of shopping centers, the type of housing available and the proximity to the sea or the mountains.
In the City Bowl, you can find everything from Victorian houses to small studios. Two-bedroom apartments sell for between 2 and 3 million Rands.
The southern suburbs, with some of the best schools in South Africa and its proximity to the University of Cape Town, attract expatriate families and the student population. Family homes with gardens sell for around 4 million.
The west coast, although close to the city center and on the seafront, remains affordable and attracts first-time buyers. Two-bedroom apartments are around 3 million Rands, and houses around 6 million Rands.
On the Atlantic coast, Green Point and Sea Point have mostly high-rise apartments that sell for around R 2.5 million for 2 bedrooms.
Bantry Bay, Clifton, Camps Bay and Llandudno are the most expensive residential areas in South Africa, with house prices exceeding R15 million. The northern suburbs, because of their distance from the city center, are very affordable, and new houses can be found there at R 2 million.
The Peninsula, which is very poorly served by public transport and far from the center of Cape Town, is also affordable. In Muizenberg and Fish Hoek, houses sell for around 1.5 million.
Prices are indicative and were found on real estate websites in 2022.
Useful links:
Last update on 06 November 2022 13:27:33