It’s important to note that South Africa has a dual property market, comprising the formal and informal sectors. The formal sector consists of properties with registered title deeds, while the informal sector includes properties in townships and informal settlements many of which await government instruction for subdivision and allocation to individuals in various government programs and initiatives. Government policies play a significant role in the property market. South Africa has implemented various initiatives to promote housing affordability and address historical inequalities. The government’s commitment to land reform and restitution aims to provide access to property ownership for previously disadvantaged individuals. Understanding these policies can help buyers identify opportunities and potential risks. While the formal sector offers greater legal protection, the informal sector often presents more affordable options. This guide will only focus on the formal sector in South Africa.

In the formal sector, to establish and verify property ownership, South Africa employs a system of title deed registration. The Deeds Registry, managed by the Registrar of Deeds, serves as a public record where property ownership is recorded. The Title Deed is the official document that provides evidence of ownership and is transferred from the seller to the buyer during the property sale. It is considered to be a well-run and administered world, class system.

Some parameters are unique to South Africa which carry much more weight in pushing your property value. Security, for instance, is something that is valued as one of the priorities and as a result estate communities, cordoned off neighbourhoods and complexes with security guards are all properties with high demand. 

The risk to invest is certainly present in South Africa’s property market. The interest rates granted on registered bonds / secured loans generally range between 8% to 15% per annum (at current prime lending rate is 11.5%) and are generally granted by the bank over a period of 20 years. Compared to various overseas bank loans where you can expect much lower interest rates on loans this might scare off potential investors who do not understand the South African market. The market is influenced by various factors, such as economic conditions, demographics, and government policies. Economic fluctuations can impact property prices and demand, so it’s crucial to keep an eye on market trends and economic indicators. Additionally, it’s essential to be aware of potential risks of property fraud.  In the South African property market, it’s important to exercise caution and conduct thorough background checks on sellers and real estate agents (or as we call them “property practitioners” or “agents”). Property inspections are also recommended to identify any structural or maintenance issues before finalizing an offer to purchase. Legal aspects are of utmost importance when purchasing property in South Africa. It is crucial to engage the services of a reputable conveyancer who specializes in property transactions. They will guide you through the legal process, including conducting due diligence, verifying property ownership and ensuring compliance with all relevant laws and regulations. The South African legal system in regard to property transfers in the formal sector does work effectively and efficiently. If you appoint the right conveyancing attorney, they will cut your investment risk to an acceptable extent which would be comparable to any developed country.

Purchasing property is a significant investment that requires navigating through legal frameworks and regulations to ensure a smooth and secure transaction. In South Africa, property purchases are governed by a robust legal system designed to safeguard the rights of property owners and facilitate the transfer of ownership. In South Africa, property ownership can take two main forms: full title and sectional title. Full title (also known as Freehold ownership) is the most common structure, where the owner possesses complete rights and control over the property and the land it occupies. On the other hand, sectional title ownership applies to multi-unit developments, such as apartments or townhouses, where owners have exclusive rights to their individual units and shared ownership of common areas.

Conveyancing attorneys play a vital role in property transactions in South Africa. These legal professionals specialize in facilitating the transfer of property ownership and ensuring all legal requirements are met. Here are some key responsibilities of attorneys in the property purchase process:

1. Due Diligence: Attorneys conduct thorough searches and investigations to verify the legal status of the property. This includes confirming ownership, existing mortgage bonds, and any other encumbrances that may impact the transaction.
2. Drafting and Reviewing Contracts: Attorneys prepare and review the legal documents required for the property sale, such as the Offer to Purchase and Sale Agreement. They ensure that the terms and conditions are fair and comply with the relevant laws and regulations. In most cases however, you will receive a draft agreement from the property agent if you indicate interest. It’s always your choice of which agreement to make use of as you are the person making the offer and it’s therefore better to use your attorney’s tailored draft or alternatively have your attorney double check the agent’s draft.
3. Facilitating Transfer: Attorneys act as intermediaries, coordinating with various parties involved in the transaction. This includes the buyer, seller, financial institutions, and the Deeds Office. They handle the payment of transfer costs, taxes and registration fees to ensure a smooth transfer of ownership.

Getting a conveyancing attorney to assist you as soon as you are interested in purchasing a particular property is paramount, especially when it’s your first purchase. You cannot have an immovable properties ownership transferred to you without assistance of a conveyancing attorney.

Compared to first world properties, third world properties generally offer lower entry costs. The affordability factor opens up opportunities for investors with limited capital to enter the market. Investing in third world properties allows for diversification and access to real estate assets that may not be within reach in more expensive markets. Buyers can get more for their money, whether it’s purchasing residential, commercial, or even agricultural properties. Rental demand in these markets can be strong due to factors such as population growth, urban migration and limited housing supply. Investors can generate regular income through rental returns, enhancing the overall investment performance. In South Africa, for example, there is a consistent demand for rental properties, making it an appealing destination for buy-to-let investments.

There is no registration process for a rental agreement in South Africa and finding a tenant for a residential property can generally be quite a simple process given that the property is marketed at the right price. Although rare, its not impossible to to lease a newly bought residential property and have enough rental income on that property to cover your bond as well as all your levies and other related expenses on the property. 

Where to look in South Africa? As always Location, Location, Location! When considering a property purchase in the country this critical factor is no different than elsewhere when considering a long-term investment. South Africa boasts a diverse range of regions, each with its own appeal and investment potential. Urban areas like Pretoria, Johannesburg, Cape Town, and Durban offer bustling city lifestyles and robust property markets. These are the economic hubs of the country and where the most properties are bought, rented and sold.  It’s also considered to be much easier to obtain a purchaser for your property in these areas. Coastal regions, such as the Western Cape and KwaZulu-Natal, attract buyers looking for holiday homes or retirement options. These holiday locations should however not be overlooked as they often host the most expensive properties as well as the best return on investment in many cases. Rural areas may present opportunities for agricultural or lifestyle properties.

Now that you have a general idea of the property market, we will give you a more detailed opinion on how to get the best bang for your buck on your property purchase. 

Before you start your journey on deciding which properties to view you need to have a clear idea of exactly what you want, what your budget is and which area you want to invest in. Do you want a home to live in? A residential property to lease and have a high rental return on investment or some other purpose? From here you can determine where to look and what to look for.  If you are a first-time home buyer, you are in for what is considered by many to be one of the most stressful life events, so hold on tight because fortune favours the bold.

To get an indication of your budget when you plan on financing your purchase, do a quick five-minute application for “pre-approval” bond finance at the bank. This is an online application which will give you a rough indication of the amount the bank would likely loan to you. Take note that the bank will still need your full purchase details at a later stage after you made an offer to determine if they give you a final bond approval on the property or not. Alternatively, if you are fortunate enough to purchase a property without obtaining a loan and doing a “cash deal” you can skip this step and simply look at your bank balance to determine your budget. 

When looking for a property you can invest in, many of the successful property investors will tell you to look at numerous properties before making the decision to buy. Some would even recommend looking at one hundred properties before making your first purchase. 

Buying a property where all or at least most of your property related expenses are covered by your rental income is usually considered a good investment. When making this calculation, don’t focus only on your bond instalment, remember that your property will also have rates and taxes, water, electricity, refuse and maintenance expenses to be considered. In some cases, you will have special levies to be paid to the complex or estate in which the property is located. When you buy a sectional title property in a complex, your levies will in most cases cover the structural insurance and exterior maintenance of the property. You will likely not have a tenant in the property for the entire duration of your bond repayments so you should also be able to cover the months in which the property is vacant and there is no rental income. If you can juggle the above and the property is paid off after years of rental income, you might just have a property that paid itself off (mostly) and which will thereafter continue to generate an income for you. Finding the right tenant for your property should also be considered carefully. We will however deal with this topic in more detail in another guide.

You can easily find properties in your scope on various websites such as Property 24, Private Property and the websites of various real estate agents. These websites usually list the property rates and taxes and the levies (if in a complex / estate) and give you an estimate of your bond installments.  Once you find a property that fits your parameters go look at the property by contacting the listing agent / property practitioner and ask for a viewing. Usually, the agent would also invite you to look at similar properties in your scope in the area which they also have under their mandate to sell and it’s not a bad idea to go look at them. Sometimes the property has better bones than it seems on the pictures online. It doesn’t cost you anything to be assisted by an agent in this manner as the agent is paid commission by the seller upon the successful sale of the property to which they have introduced you as the purchaser to them or to which they have been the result of the sale. In South Africa we generally do not have an additional broker apart from the property practitioner / agent as would be the case in many other countries. It is worthy to take note that the agent represents and is appointed by the seller and although there are certain legal requirements of disclosures and due care that the agent needs to abide by you need to remember that the agent is not always acting in your best interest but rather that of the seller and to get their own agenda to earn a commission from a successful sale.

Once you have found the ideal property to buy, don’t let anyone bully you into signing an offer to purchase immediately. You will only be held liable for the purchase and therefore incur an expense when you sign an offer to purchase as discussed below. You still have some checks to do before you sign an offer. It wouldn’t hurt to ask the agent to provide you with a report showing the relative sale price of similar properties in the area. Using this you can consider the price you make as an offer to be fair. the Property practitioners use various companies such as Lightstone and Windeed which can provide them and in turn, you with a value estimate based on the municipal and local sale price of nearby properties at a low-cost fee. In many cases agents provide these to the seller before listing the property online for sale to determine a good selling price. These should be taken with a grain of salt as they do not consider renovations and possible expensive interior upgrades of your chosen property. These reports will also show you the previous purchase price of your chosen property and the capital bond amount taken as loan by the seller upon their initial purchase. If the agent on the off chance cannot provide this to you, you can contact any conveyancing attorney who would be happy to assist you.

As mentioned above, do a proper inspection. In South Africa you will likely purchase a property “voetstoots”. This refers to the sale of property “as is,” where the buyer accepts the property in its current condition, including any defects or problems that may exist. It is a common term used in property transactions and is derived from the Dutch language, meaning “as is” or “with all faults. When a property is sold voetstoots, the seller is not responsible for any defects or faults that may be present in the property. This means that the buyer accepts the property in its current state, without any guarantees or warranties from the seller regarding its condition. However, South African law recognizes two types of defects that may affect a voetstoots sale: latent defects and patent defects.

1. Latent Defects: These are defects that are not immediately visible or apparent upon a reasonable inspection of the property. Latent defects refer to hidden flaws or faults that would not be easily discovered during a routine inspection. In the case of a latent defect, the seller may be held liable if they were aware of the defect and deliberately concealed it from the buyer.
2. Patent Defects: These defects are visible or obvious upon a reasonable inspection of the property. Patent defects refer to faults or problems that can be easily identified during a visual examination of the property. In a voetstoots sale, the buyer has the responsibility to conduct a thorough inspection of the property and identify any patent defects before the sale is concluded. If the buyer fails to identify a patent defect before the sale, they will have no recourse against the seller.

When doing your inspection, we recommend in many cases that you make use of an independent professional who is qualified to do your inspections for you. There are numerous home inspectors who know what to look for and provide you with a defect list after their inspection. They obviously charge a fee for this but if you use the defect report in negotiating a lower price on the property, you will likely make more than your money back in convincing the seller to take a lower offer by making them aware of the defect. The seller’s agent is also obligated to inform you of all the latent defects but in many cases they and the seller are not aware of all the defects to the property. A cracked foundation for instance may only be visible when removing the wooden floors and could be a great financial burden to deal with so make sure you know what you are getting.

Now that you have found the perfect property, inspected it and determined what the relative price for the property in the area is, you should be able to make an offer. The price that the property is listed for online is not always the price you need to pay. You can try and negotiate with the seller or his agent for a lower price. Some properties are in the market for long periods. Sellers get desperate in times of high loan interest and agents want their commission as soon as possible after being appointed to obtain a purchaser. Discuss the price with the agent and find out if they would consider a lower price. Use your inspection / defect report and Lightstone / Windeed report in negotiating a lower price. Sometimes, an agent knows that the property is already listed to sell quickly and will tell you immediately that a lowball price would be a waste of time. Discussing this with the agent will give you a feel of what the property would sell for.

If you sign an offer to purchase, make sure you have all your risks covered. Once again, getting your own attorney to do this for you by checking / drafting your offer to purchase is advised. Remember that if you are intending to pay for the bond, you need to add this as a suspensive condition. If you don’t stipulate this, and the bank declines your loan application, you will still be liable to purchase the property and will not be able to cancel based on your failure to obtain a loan. There are also various other factors which your attorney will help you with. If you are married in community of property, you need to sign the offer with your spouse.  When you requested a specific defect to be repaired by the seller, this must be noted. The date when you need to occupy the property must be included in the offer. Consider how long the offer is valid for before you can accept that the seller did not accept and the offer lapses. These are only some of the considerations that your attorney will help you with. The agent will not consider all your needs when giving you a standard / template offer to purchase. Once the seller signs your offer and thereby accepts your offer, you will be obligated to perform as you have agreed and can be forced to comply in terms of an order of court if you fail to do so, so make sure you are able to perform in terms of the offer which is made.

The Seller also appoints or rather nominates the conveyancing attorney which will be responsible to arrange the transfer of the property into your name. These attorneys are however paid by you as the purchaser even though the seller selects this specific attorney. The conveyancer is an attorney which acts in the interest of both parties to affect the transaction as per the signed documents. The price the conveyancer or in this case the “transfer attorney” charges is determined by a recommended fee based on the purchase price. If you have already approached a conveyancing attorney and would prefer that they be the nominated conveyancer, you can always make this a condition in your offer. After all it is an offer which is made as a ”take it or leave it” negotiation.

You also need to be mindful of further possible expenses to transfer the property. If you are applying for a bond, your bond registration costs will also be additional as this is done by a separate “bond registration attorney” which is also a conveyancer who ensures the bond is registered against the title deed of the property immediately when it is registered in your name. You also need to be mindful of other possible expenses to finalise transfer such as transfer duty or value added tax which could be significant. You can find our cost calculator on our website (https://britslaw.com/cost-calculator/) to give you an estimate of how much it will cost you to transfer a property to your name as well as the possible bond registration costs.

As soon as the seller accepts your offer, the agent will inform you and you will be contacted by the appointed conveyancing attorney. The attorney will provide you with necessary documents they need signed to proceed and schedule an appointment with you. 

If you are making use of bond finance, we recommend that you immediately contact a bond originator. These are companies that specialise in negotiating with the banks to obtain the best interest rate on your bond. They are paid commission by the bank and it’s therefore a free service to you. You can always try and do this yourself by just approaching a bank and indicating that you wish to move forward with your pre-approved bond. In most cases the bond originators can get a better deal for you. The bond originators will also assist you to get all the documents ready for your bond approval. 

Once the bank gives you final approval on your bond, the bank will appoint a bond registration attorney. It is your responsibility to inform your transfer attorney when this occurs so that they can work together to finalise your transaction. 

Hereafter, the transaction will be in the hands of both attorneys as well as a third attorney which will deal with any possible bond to be cancelled in the name of the seller. You as the purchaser do not need to be concerned much about this third attorney as they are paid by the seller.