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House Hunting in ... South Africa

The New York Times – Great homes and destinations

MARKET OVERVIEW

“The market in South Africa was hit quite hard by the global recession,” said Sanett Uys, the corporate affairs director for Colliers International South Africa, a real estate company in Cape Town that tracks the property market.

The market peaked in 2007, Ms. Uys said, but when the South African National Credit Act went into effect on June 1, 2007, financing became harder to get and the market slowed. Since then sales volumes have dropped by nearly 40 percent in some parts of South Africa, she added. Although houses are taking longer to sell, Ms. Uys said, “prices have been stable for the last 12 months.”

Now Ms. Uys believes the market has hit bottom. “We’ve had a couple of months with good sales coming through,” she added.

Wealthier areas along the Atlantic seaboard near Cape Town have stayed relatively strong. Most buyers there do not need financing, and foreign buyers are still showing interest in Camps Bay, Clifton, and other wealthy suburbs of Cape Town, according to Ms. Uys. Luxury homes in these areas sell for 6 million to 20 million rand ($790,000 to $2.6 million). In Plettenberg Bay, however, it’s possible to find a nice house for 3 to 5 million rand ($395,000 to $660,000). In Johannesburg, Ms. Uys said, a nice house in the Westcliff area is likely to cost at least 7 million rand ($920,000).

House prices in Plettenberg Bay vary widely depending on proximity to the beach, according to Fiona Thorpe, a property consultant with Lew Geffen Sotheby’s International Realty in Plettenberg Bay and the listing agent for the house featured here. Inland vacation homes sell for around 3.5 million rand ($475,000), but beachfront can cost as much as 30 million rand ($4.05 million). Ms. Thorpe estimated that if this house had beachfront access, it would cost 10 million rand ($1.35 million) more than its current asking price.

WHO BUYS IN SOUTH AFRICA

Most foreign buyers who come to South Africa are drawn to the Cape Town area, said Jayke Meneses, a property consultant with the Johannesburg office of Sotheby’s International Realty. The Garden Route region, a lush, mountainous terrain stretching along the coast from the Western Cape into the Eastern Cape, is especially popular. Foreigners who buy in Johannesburg and Pretoria, which are both in the Gauteng province, commonly come from elsewhere in Africa, often Kenya, Nigeria and Tanzania. They are drawn by the well-regarded schools in the area, Mr. Meneses added.

The country’s game farms are attractive to foreigners from all over the world, especially Europe and North America, according to Ms. Thorpe. She said that this house’s area had historically been popular with domestic tourists, especially vacationers from Johannesburg, but that there was growing interest in the area from foreigners as well.

BUYING BASICS

Foreigners are not restricted from owning property in South Africa, Ms. Thorpe said, but in general the maximum amount of financing they can get is 50 percent. That said, most foreigners pay in cash.

Buyers pay a transfer tax, the exact amount depending on the purchase price. This house is listed at 6.5 million rand; its transfer tax would be 465,000 rand ($62,700), plus 29,000 rand ($3,900) for legal fees, 4,060 ($548) in value-added tax and another 1,000 rand ($135) in deed-transfer costs.

When foreigners sell their South African properties, Ms. Thorpe said, the government withholds about 20 percent of the sales price until all capital gains taxes are paid. Capital gains tax levels are pegged to income-tax bracket.

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