FOREIGN BUYERS OF SA PROPERTY STILL MUCH IN EVIDENCE SAYS APKF MD

The recent decline in the USA, UK and many European growth rates (and in the value of their share markets) may have given the impression in SA that all foreigners are now pulling in their horns and that the chances of selling a home to an offshore buyer here are now almost nil – but this is very definitely not so, says Lanice Steward, MD of Anne Porter Knight Frank.

 “The high interest rates in SA, the excellent returns on certain start-up operations, the weather and the recreational opportunities are all just as attractive to overseas buyers as they were before,” said Steward, “and those firms – like APKF – with offshore estate agency alliances are still attracting regular enquiries.  It may even be, as one BBC economic commentator has suggested, that Brits, Americans, Germans and others now see SA, along with the newly opened European countries, as a safe haven in which they can ride out the slump which they fear could last two to three years. 

 Estate agents handling this type of client, said Steward, must, however, be aware from the outset that in terms of Regulation 3 (1)(F) of the Exchange Control Regulations authorised financial dealers (including banks) are allowed to give non-residents bonds only if they are matched rand for rand by the funds introduced to SA for the sole purpose of buying the home. 

 “In simple language,” said Steward, “that means that they may qualify only for a 50% mortgage bond.”

 Sellers and their agents must, said Steward, check the residential status of their foreign buyers, many of whom have been living in countries such as Spain and Portugal which actually encourage offshore buyers to fund their property purchases through their local institutions.

 This may come as a surprise to many but to date, said Steward, the 50/50 regulation has very seldom been a stumbling block to overseas buyers in SA.

 Foreign buyers looking for mortgage bonds to buy in SA, said Steward, are permitted the use of offshore finance arranged by SA banks.  Such buyers, she said, must accept that the rand has been one of the world’s more volatile currencies and if they lock themselves into a Euro, a Pound or Yen arrangement, this could cost them more than they anticipated – and put them in line for a substantially larger-than-expected payoff when they sell and terminate their bond.

 This drawback should be weighed against the bonus factor that the mortgage bondholder with offshore finance will usually be paying a far lower interest rate.

 These facts, said Steward, have recently been publicised in the legal firm Smith Tabata Buchanan Boyes’ online newsletter – “and we can be grateful to them because they are still not as widely understood as they ought to be”. 

For further information contact Lanice Steward on 021 671 9120 or email lanice@anneporter.co.za.