Buying a house is one of the biggest financial commitments you’ll ever make! It’s important do your research on ALL the costs of buying a house in South Africa.
The price you see listed on the property website is not the final price that you will pay when purchasing a house in South Africa and you also have to take into consideration the monthly costs of owning a house.
Depending on whether you are purchasing the property cash or using a mortgage (loan from the bank), there are various hidden costs when buying a house in SA.
Costs associated with owning a home
If you’re wondering what are the two major costs of owning a home, they are: a deposit of 10% of the property cost and the transfer costs.
After you sign an offer to purchase agreement, you are bound to pay a deposit to ensure that you will honour the agreement. If you are purchasing the house through a bank, paying a deposit can lead to a better interest rate.
Transfer costs in South Africa
Transfer costs are the fee paid for receipt of the title deed when purchasing a property. These costs include conveyancing fees (attorney fees), transfer duty, costs related to verifying the respective parties for FICA, and fees for the Deeds Office including a levy and costs for any mandatory searches by the Deeds Office. Additionally, there may also be small additional costs for postage.
Who pays transfer duty
Transfer duty is a tax payable to SARS on the transfer of immovable property purchased for more than R900 000. The tax that is payable by the transferring authority and itis calculated depending on whether the property is registered for VAT or not.
Calculate the cost of transfer duty
These are the transfer duty rates applicable on property purchased on or after 1 March 2017.
|Value of property (R)||Rate|
|0 – 900 000||No transfer duty|
|900 001 – 1 250 000||3% of the value above R900 000|
|1 250 001 – 1 750 000||R10 500 + 6% of the value above R1 250 000|
|1 750 001 – 2 250 000||R40 500 + 8% of the value above R1 750 000|
|2 250 001 – 10 000 000||R80 500 + 11% of the value above R2 250 000|
|10 000 001 and above||R933 000 + 13% of the value above R10 000 000|
Monthly costs of owning a house
Homeowners insurance in South Africa covers your house’s full replacement value against loss or damage. There are different types of insurance premiums, the most common is Home Contents Insurance which covers movable items in your home such as clothing, electronics, and furniture.
One important clause to consider is that once content leaves your home, it is no longer covered by Home Content Insurance, but it falls under Personal Belongs and these items need an additional coverage.
Rates and taxes
The rates and taxes associated with owning a house depend on the type of property you purchase. If you choose a freestanding property, you need to pay the municipality for services such as rubbish removal and the maintenance of roads and street lights in your area; and even sewerage facilities.
When you purchase a sectional title property in an estate or apartment building you will also have to pay levies in addition to rates and taxes. These levies cover the cost of running the building and include landscaping, repairs and maintenance, and even limited building insurance coverage for things such as geysers.
Water and Electricity
One of the monthly costs of owning a house is your household’s monthly consumption of water and electricity.
The state-owned company, Eskom is the sole producer of electricity in South Africa. Eskom supplies about 95% of South Africa’s electricity and about 45% of all Africa’s electricity consumption.
Homeowners have the option of using a prepaid electricity system or they can be billed monthly for the amount of electricity you use. Most people use prepaid meters as they allow you to prepay and monitor your usage.
The South African electricity supply is 230 volts AC 50 HZ. Most plugs are 15 amp 3-prong or 5 amp 2-prong, with round pins. Both water and electricity are payable to your local municipality.
Before you call a realtor or apply for a mortgage it’s important to have a good understand of the hidden costs of owning a home and also have a realistic budget.
If you don’t have a budget, or if yours is more of a guesstimate at your expenses, now is the time to really get an understanding of your spending. Start by listing all income sources and totaling these amounts. When figuring out your monthly expenses, look at the past three months from your bank statements.