Foreign Passport, SA Property Owner: It’s Easier Than You Think

Buying investment property in South Africa as a foreign national or non-resident is a) possible, b) surprisingly uncomplicated and c) a good investment over the long term. Property on a global scale is known to be a stable asset and in South Africa it has historically provided year-on-year growth, with one’s investment increasing in value consistently.

South Africa’s property market is well regulated and the ability to finance properties easy and formulaic. This presents foreign owners with a solid investment case, whether you’re buying a house to rent out or a holiday home for your family. Buying property in South Africa as a non-resident is a straightforward process, provided you understand the legal and financial requirements.

Understand Legal Requirements for Foreign Buyers

We need to start with an important clarification: legal buyers in this case can be ‘foreign nationals’ or ‘non-residents’, and distinction is key when applying for finance, and some of the other key requirements.

There are no restrictions in respect of legal property ownership by foreign nationals or non-residents. Procedures and requirements must be followed for specific situations though, for example, foreign entities need to register themselves to buy property in South Africa. Non-resident property purchasers intending to live in SA need to apply for a residence permit, and ownership of property does not guarantee a successful application.

Some terminology to be aware of in the South African context: contracts are generally referred to as an Offer to Purchase (‘OTP’) and, if accepted by all parties, it becomes an Agreement of Sale. The standard definitions of contracts apply to citizens, foreign nationals as well as non-residents:

  • The contract must be in writing.
  • It must specify the parties, property and price offered.
  • It must be signed by both the purchaser and seller to be valid and legally binding.

Neither party can withdraw from a signed contract without suffering legal consequences. However, if certain stated conditions are not fulfilled (e.g. the purchaser cannot get the purchase financed), this would invalidate the sale.

Budget and Financing Options

One of the benefits of raising finance in the local currency is that it simplifies transactions. Foreign nationals are eligible for home loans equal to 75% of the value of a property through most local banks, but they can negotiate for more depending on their circumstances and the specifics of their application. Non-residents only qualify for a loan of 50% of the property value, subject to the lending requirements of local financial institutions. This is conditional provided that the initial 50% of the purchase price plus the transfer fees and transfer duties are available as a deposit.

Proof of income(s) and creditworthiness are required for an application for home finance for all applicants, regardless of nationality. If you’re being paid in a foreign currency, your affordability will be calculated by considering your income, less debt repayments and expenses (including offshore expenses), while taking potentially risky currency fluctuations into account. If you intend to rent out your property, you can have rent paid into your local bank account from which your monthly loan instalments are deducted.

All property purchases in South Africa made where foreign currency funds are being used to pay for deposits etc. need to have those funds transferred into the country legitimately via a South African commercial bank. This will adhere to foreign exchange control regulations. Failure to do so will create issues when the property is sold later and ensures the money can be repatriated post-sale.

Trusted Experts Providing Guidance

If you aren’t confident about buying a property in South Africa because you don’t know the local market well enough, the most valuable investment you can make is time engaging with experts who do. For researching the market, suburbs, property prices, opportunities for above-average growth, safe neighbourhoods, requirements for features in a rental market, reliability of municipal services, access to hospitals and schools, etc. – a property practitioner/estate agent is the expert you’ll need. Working with reputable property agents who have assisted international buyers in the past and can help you find suitable options will make the property-buying journey a smoother one.

Choosing the location of your home/investment property should be an informed and careful process, depending on the intentions for your purpose (investment, vacation home, rental income, etc.). Experts are also available to assist with property valuations, home inspections, opportunities for renovations or new builds – the list is endless really. Your priority should be requesting reliable recommendations from locals and building relationships with these experts that can assist in a hands-on manner if you’re not in the country.

In South Africa, property transfers are handled by conveyancers (specialised property attorneys). The seller usually nominates the conveyancer, but as the buyer, you can choose your own legal expert for guidance. This expert needs to have the expertise to assist you with exchange control regulations to ensure compliance with the South African Reserve Bank (SARB) rules regarding foreign investments.

If you sell the property in the future, you can repatriate the proceeds (capital and profit) as long as the original purchase was funded through a South African bank and properly recorded. Engage with tax and legal professionals to manage any capital gains tax (CGT) or other obligations.

Get Pre-Approved Upfront

Even as a foreigner, getting pre-approved is a critical step in the home-buying process. A pre-approval gives you clarity on how much you can borrow and ensures you remain within your budget, and it helps you focus on properties you can realistically afford.

It will assist you in avoiding financing delays if you plan to take out a home loan to fund 50% or 25% of the property value. If you’re transferring funds from abroad to pay for the property, a pre-approval can demonstrate to the South African Reserve Bank (SARB) that you’re meeting foreign exchange control requirements.

You’ll need to have the following documents on hand to do a pre-approval:

  • Proof of income (e.g. recent payslips or tax returns)
  • Employment contract
  • Bank statements for the past 3-6 months
  • Fully completed home loan application
  • Copy of your passport
  • Proof of address in your home country
  • Signed and dated statement of assets and liabilities

South Africa presents a compelling opportunity for foreign investors looking to purchase property, offering diverse landscapes, a favourable exchange rate and no restrictions on foreign ownership. However, buyers should be aware of the process to buy, key legal, financial and tax considerations, including exchange control regulations and potential residency implications. With thorough research and professional guidance, foreign buyers can successfully navigate the market and make informed investment decisions in this dynamic and evolving real estate landscape.

For more information, contact one of our GetGo Home Loans Specialists to guide you through the process.