PROPERTY TRANSFER COSTS IN SOUTH AFRICA
It is very exciting buying a home, whether it’s your first or your next. However, buying a property and signing the Offer To Purchase can also be stressful. To avoid causing any unnecessary additional stress, it’s important to know what costs you’ll incur when you buy a house, above and beyond its asking price. As a rule of thumb, you should allow for between 8% and 10% of the purchase price of the property for all the other costs involved in purchasing a property. These costs will include bond registration fees, transfer duty, transfer costs, and other legal fees.
When purchasing a property, there is often confusion regarding the distinction between transfer duty and transfer costs. Let’s start by explaining what they are and what you could expect to pay.
What are transfer costs?
The transfer fees are paid to a transferring attorney, who is appointed by the seller to transfer ownership of the property to the buyer. These costs are payable by the buyer and will vary, depending on the property purchase price. It will also be made up of the conveyancer’s fees, such as postage and petties, plus VAT. Usually, the attorneys will provide the buyer with a breakdown of their costs at the inception of a transaction in the form of a proforma account.
What is transfer duty?
Transfer duty is a tax levied on the sale of a fixed property acquired by any person by way of a transaction or in any other way. These costs are payable by the buyer to the SA Revenue Service (SARS) when the property is transferred from the existing owner to the new owner. Transfer duty is not to be confused with the transfer of property cost. Transfer duties only apply to properties worth more than R1 000 000. From 1 April 2011, all Transfer Duty must be paid electronically via eFiling. This will normally be done by a Conveyancer, who acts on your behalf.
How much is the current transfer duty?
The transfer duty rates applicable on property, as of March 2022 to February 2023 according to SARS is as follows:
|?Value of the property (R)||Rate|
|1 - 1 000 000:||0%|
|1 000 001 – 1 375 000:||3% of the value above R1 000 000|
|1 375 001 – 1 925 000:||R11 250 + 6% of the value above R 1 375 000|
|1 925 001 – 2 475 000:||R44 250 + 8% of the value above R 1 925 000|
|2 475 001 – 11 000 000:||R88 250 +11% of the value above R2 475 000|
|11 000 001 and above:||R1 026 000 + 13% of the value exceeding R11 000 000|
How are transfer costs calculated in South Africa?
Transfer costs vary depending on the purchase price. They are equal to the conveyancing attorney’s fees plus VAT. You can use aBetterBond’s bond and transfer cost calculator to determine your transfer costs. For example, on a home loan of R1 000 000 at an 8.25% interest rate over 20 years, it would be R30 753.00 (including VAT). Keep in mind that there will be additional bond registration costs for those who are purchasing through home finance. These amounts can also be found on BerrerBond’s website.
Can transfer fees be included in a bond?
There is the option aimed at first-time buyers of a 105% bond, in which the extra 5% covers additional costs, including the transfer and bond registration costs. That means that, although you won’t have to pay a deposit or transfer and bond registration costs upfront, these costs will be added to your loan amount so your monthly repayments will be higher as a result.
What are the conditions for me to be exempt from transfer duty?
As mentioned, transfer duty is not applicable on a property that cost less than R1 000 000. Apart from this, there are some other conditions where you will be exempt from transfer duties:
- Marriage In Community: If someone who owns a property gets married in community of property, his or her spouse will automatically become the owner of a half-share of that property, without paying the transfer duty.
- Inheritance: Beneficiaries and heirs are exempt from paying transfer duty on property they inherited from a deceased estate, irrespective of whether or not the deceased died without a valid will and regardless of the nature of their relationship with the deceased.
- Divorce:If a property is awarded to a spouse in terms of a divorce order, transfer duty does not apply. The exemption applies to all marital regimes and to civil unions. If the parties reach an agreement outside of the formal divorce proceedings, the spouse who acquires the property will be liable for transfer duty.
- Cancelled transactions: If a property purchase is cancelled before the transfer is registered at the Deeds Office, there is no liability for transfer duty if SARS is satisfied that the cancellation is legitimate.
What if the transaction is on condition of the sale of your current home?
It is a South African law that transfer duty on any sale must be paid no later than 6 months from the date of conclusion of the deed of sale. Under normal circumstances, this condition is not worth worrying too much about as most homes take around 3 months to sell and another 3 months for the transfer to go through, all of which will fall within the stipulated 6-month period. However, if this isn’t the case, the buyer will have to ensure that the transfer duty is paid within the 6 month period.
Keep In Mind
Before you make an offer on a property, you should work out how much the transfer duties and bond registration costs will amount to, as these amounts will be payable upfront after the OTP has been accepted. You can do the calculations on BetterBond's website. For further assistance in acquiring your dream home, contact the knowledgeable real estate professionals at your nearest RE/MAX Office.