When it comes to buying or selling property in South Africa, both buyers and sellers must consider several costs involved in the transaction. These costs vary depending on factors such as the property’s value and the type of sale.
Here’s a comprehensive breakdown of the costs buyers and sellers can expect to incur:
Buyer’s Costs
1. Transfer Duty
Transfer duty is a tax imposed by the South African government on the transfer of property ownership. As of March 2023, properties valued below R1,100,000 are exempt from transfer duty. For properties above this threshold, the transfer duty is calculated as follows:
- From R1,100,001 to R1,512,500: 3% on the value above R1,100,000.
- From R1,512,501 to R2,117,500: 6% on the value above R1,512,500, plus a flat rate.
- For properties valued above R2,117,500, higher brackets apply with increased duty rates.
2. Conveyancing Fees
Conveyancing fees are legal fees charged by the attorney handling the transfer process. The attorney’s fees cover services such as the drafting and registration of the sale agreement, facilitating the transfer process, and ensuring that all legal requirements are met.
3. Deeds Office Registry Fees
The Deeds Office registry fees are required for the registration of the property transfer and are typically based on the property’s value. These fees are necessary for the official recording of the change in ownership.
4. Other Costs
Buyers may also incur additional costs such as home inspection fees or certificates needed for title restrictions. These costs can vary depending on the condition of the property and whether any additional services are required.
Seller’s Costs
1. Real Estate Agent Fees
Sellers are typically responsible for paying the real estate agent’s commission, which ranges from 5% to 8% of the sale price. This fee is usually paid once the sale has been completed and the property has been sold.
2. Bond Cancellation Fees
If the seller has an existing mortgage bond on the property, they may incur bond cancellation fees. These fees are associated with the process of cancelling the bond once the property is sold. The seller will also need to settle the outstanding bond balance before the transaction can be completed.
Additional Considerations
1. VAT vs. Transfer Duty
When buying property from a developer or a VAT-registered seller, the buyer may be subject to VAT instead of transfer duty. This typically applies in cases where the seller is a business or VAT-registered entity and the property forms part of their business operations.
2. Total Buyer Costs
When factoring in all of the additional expenses such as transfer duty, conveyancing fees, and Deeds Office registry fees, the total cost for buyers can amount to approximately 8-10% of the purchase price. It’s important for buyers to plan for these additional costs to avoid any financial surprises during the transaction.
Proper planning can help ensure a smooth transaction. Contact Swemmer & Levin to ensure that your property transaction proceeds smoothly, with no unexpected surprises.
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.