Historically South Africa has been one of the most controversial countries in the world, although times have changed and great progress has been made.  Cast into the wilderness by many unions around the world, the authorities were forced to make changes and improve their record on internal disputes. South Africa is very much back on the world stage, and while there is still much to do, especially in the rural areas, both the economy and the property markets have shown great strength over the last few years.

Introduction To South Africa

One of the central members of the Commonwealth of Nations, South Africa is bordered by Namibia, Botswana, Zimbabwe, Mozambique, Swaziland and Lesotho. South Africa has a population of over 47 million and a land mass of 1.2 million km2 - both a large physical presence and a large influence in the area.  As you would expect with such a large land area, there is a mass of different types of terrain and climate.   Ranging from the colder moutainous areas inland to the many desert terrains, the country has everything, as well as a history which goes back centuries and perhaps one of the most varied cultures in the world.

Once a major part of the British Empire, South Africa has long been a major hot spot for many western European immigrants, with the UK and Holland having a significant presence.  While the economy has taken some time to recover from the difficulties of trade sanctions, there are signs that it is regaining its once held major position in the world economy. Historically dependent upon agriculture, the economy has been further widened with areas such as construction, tourism and domestic service industries becoming more prominent. There is still work to do with regards to the country’s export record, but progress is being made.

Property Market in South Africa

The South African property market has perhaps been the biggest benefactor of the country’s return to the world stage.  There has never been any doubt that the country offers some of the most varied and beautiful landscapes  and cultures in the world. It is perhaps this potent mix of different cultures which has been the source of the country’s troubles.

The authorities have also played their part in reinflating the property market, introducing attractive tax breaks and simple regulations for those looking to purchase property.  While few investors needed much encouragement once the trade barriers were removed, the financial assistance has been warmly welcomed. 

Areas such as Pretoria, Bloemfontein, Cape Town and Johannesburg have been very much at the forefront of the rise in property prices, although each has moved forward at different speeds, and is effected by their own particular local circumstances.  The broad performance of the property market has been very positive, but there are markets within markets, with many rural areas yet to feel any real benefit from the “boom”.  The main business centres have been the areas which have benefited most, with foreign businesses and expats looking to pump big money into the economy.

Tourism has, and will always be a major part of the makeup of South Africa and while it is heavily promoted and supported by the relevant authorities, in truth it actually sells itself.  As the past reputation of South Africa improves, this will open up yet more tourist markets to the country, bring yet more foreign investment, and increasing immigration numbers.  The relative stability of the local currency, the Rand, has also played a major part in the current episode in the economic revival of the country.

Buying Property in South Africa

While there are no restrictions on the foreign ownership of South African property , all of the relevant paperwork needs be completed prior to completion, and a local representative appointed to oversee the transaction.  For those looking to acquire property in the country and also live there, the relevant residency application will be required in order to keep everything above board.

However, the authorities have instigated a major restriction for foreign investor looking to acquire finance in the country - the maximum which they may borrow is only 50% of the overall cost, thereby distinguishing much of the speculative nature of some investors.  There are no such restrictions for expats who have applied for residency, or South African nationals.  While possibly a major issue for some overseas investors, there is some sense and reason behind the theory.

Aside from the actual cost of the property, there is only really one major cost for the buyer which is the transfer levy, payable to the South African authorities.  The property value bands are as follows :-

• 0 - 500,000 Rands, 0%
• 500,000 - 1,000,000 5%
• 1,000,000 and above 8%

For those looking to acquire a property via a legal entity ( a business) the cost is actually a flat 8%, no matter what the value of the property.  For those who make a capital gain on a property investment, there may be capital gains tax to pay, but this can vary for different entities and should always be clarified when looking to enter the property market.

Future Property Market

While it has taken some time for South Africa to regain the reputation it lost in the troubled times, there are signs of a real interest in the country (and more importantly the property market) from overseas investors.  It is essential that the authorities continue their investor led policies which are opening many new doors for country, and bringing in more and more overseas investors.

The continuous influx of foreign nationals and expats is proving a great boost to both the economy and property markets, although there are a small number of hot spots as well as areas which remain relatively untouched.  It may be that rural difference and issues will calm down once we see a real shift of property price increase towards the countryside.  It is essential that the government bring in the rural inhabitants who so often feel left out of the bigger picture.

Whatever happens in the South African market there is no doubting that the landscapes are perhaps some of the most beautiful in the world and the country has so much to offer.  It would be a shame for many if they were deprived of ever seeing this natural beauty, because of issues of the past which can still over shadow the country’s move forward.

The balance between success and failure is very tight for the South African authorities who have to be seen to cater for local residents while encouraging much needed overseas investment.  The last 10 years have seen a success in this area, and many believe that the country has much more mileage left. It may well be that the rocky ride which was South Africa is set for a sustained period of calm - to the benefit of all.