Understanding transfer costs and duties when buying property in South Africa
Category Property Advice
When purchasing a property in South Africa, it is essential to understand that the purchase price is not the only expense that buyers will incur. Along with the purchase price, there are several additional costs that are involved in the transfer of ownership from the seller to the buyer. These costs are collectively known as transfer costs and can be a significant expense, often requiring up to 10% of the purchase price to be set aside.
What are transfer costs?
Transfer costs are the fees associated with the transfer of ownership of a property from the seller to the buyer. These costs are payable by the buyer and are typically a percentage of the purchase price of the property. The fees associated with transfer costs can vary based on a range of factors, including the value of the property, the type of property, and the location of the property.
The responsibility for paying transfer costs rests with the buyer and must be settled within six months from the date of acquisition. Failure to pay within this timeframe will result in interest being charged at a rate of 10% per year for each completed month, starting from the first day after the expiry of the interest-free period to the payment date. In the case of conditional sales, the six-month period begins on the date the transaction was entered into, not when the contract becomes binding, meaning the period starts on the last date of party signature to the agreement, not the date the conditions are met.
What are the current transfer duty rates?
Transfer duty is a tax levied by the South African government on the transfer of property ownership from the seller to the buyer. This tax is calculated as a percentage of the purchase price of the property and is payable by the buyer. The payment for transfer duty is made to either the estate agent or conveyancing attorney responsible for transferring the property into the buyer's ownership. In South Africa, it is the seller who appoints the conveyancing attorney, though the cost is still borne by the buyer. Negotiating fees with the conveyancing attorney can be challenging, but buyers can suggest their own attorneys.
As of March 2023, the transfer duty threshold sits at R1 100 000 which means that properties valued below R1 100 000 are not subject to any transfer costs.
These costs will apply to properties purchased after March 1, 2023:
- From R1 100 001 to R1 512 500, the transfer duty is calculated at 3% of the value above R1 100 000.
- From R1 512 501 to R 2 117 500, the transfer duty is calculated at 6% on the value above R1 512 500 PLUS a flat rate of R12 375.
- From R2 117 501 to R2 722 500, the transfer duty is calculated at 8% on the value above R2 117 500, PLUS a flat rate of R48 675.
- From R22 722 501 to R12 100 000, the transfer duty is calculated at 11% of the value above R2 722 500 PLUS R97 075.
- From R12 100 001 and above, the transfer duty is calculated at 13% of the value exceeding R12 100 000 PLUS R1 128 600.
What are conveyancing fees?
Conveyancing fees are the fees charged by the conveyancer for handling the transfer of ownership from the seller to the buyer. These fees are typically based on the purchase price of the property and cover the conveyancer's time and expertise in facilitating the transfer.
Conveyancing fees can vary depending on the complexity of the transfer and the location of the property. However, it is common for conveyancing fees to be between 1% and 2% of the purchase price.
When buying a property, you are required to pay transfer fees to the conveyancing attorney who facilitates the transfer of ownership from the seller to you. These transfer costs cover the attorney's fees and the transfer duty payable to SARS. To avoid paying transfer costs upfront, you have the option of applying for a 105% home loan which includes the transfer and bond registration costs in the monthly repayments.
If you're interested in buying or selling property in South Africa, including the sought-after Atlantic Seaboard region, contact Knight Frank today to get started.
Author: Knight Frank
