With foreign buyer interest increasing in property ownership in South Africa due to the weak rand and the favourable exchange rate, there are a few things the buyers, possibly the sellers, and their agents should remember when it comes to signing a purchase agreement where buyers are foreigners, says Lanice Steward, managing director of Knight Frank Residential SA.
In South Africa, if the buyer is married with an ante-nuptial contract in place, it allows the spouses the ability to contract as individuals, but if they buy property while married in community of property, it is advised that both sign the offer to purchase as one spouse would have to give the other permission to enter into a surety agreement, said Steward.
But if a married foreign couple is buying a South African property, what are the rules around this sort of purchase?
Many agents lack intimate knowledge of a foreign countries’ laws. It is, therefore, advisable that both parties sign the contract because they could be bound by the laws of their country and this is particularly important where a suretyship is involved, said Steward.
In the event where there aren’t two signatures, the sale can be challenged in court if there is a dispute.
Another requirement is that foreign buyers have to ensure they have a South African tax number, and any entity buying or selling must also provide a South African tax number. This is not difficult to get and is easily accessed through either the parties’ attorney, tax consultant or online, she said.
When bringing in money from overseas, the buyer must make sure they get the original deal receipt showing the exchange rate and the money must enter the country via the Reserve Bank. While there might be a short term gain by paying the seller directly from an overseas account at a discounted price, this would be to the seller’s advantage and not the buyer, because on the resale of the property the foreigner would not be able to take his money out of the country, said Steward.
When bringing in the funds, it is important that it goes straight to an attorney or estate agent’s trust account pertaining to the purchase of the property and not a friend’s or relative’s account in SA. This is so that there is proof that the money went towards the purchase of the property, she said.
It is advisable for foreign buyers to keep detailed receipts of all improvements made to the property, so that when they want to resell, this can be written off against their profit and they will pay a lower Capital Gains Tax amount.
If the buyer will be letting out the property while he is not in SA, they must be aware that they will need a non-resident South African bank account.
Lastly, because of the new visa requirements, within the first week of arriving in South Africa, they must apply for an extension on their 90 day visa, from the new visa centres, as this will no longer be done through the Home Affairs offices, said Steward.
“Foreign buying of properties, particularly in coastal towns, is still on the rise and it is important that agents be aware of what is required, so that no party is put at risk,” she said.