The true cost of buying a house in South Africa, including hidden fees

Buying a property is a huge financial commitment. Don’t get caught short by these frequently forgotten additional costs. David Jacobs, Gauteng regional manager for the Rawson Property Group, runs through all the expenses buyers need to prepare for, and shares a few cost-saving tips.

Transfer Costs

Conveyancer’s Fee

This fee is paid by the buyer to the conveyancer in return for registering ownership of the property in the buyer’s name with the Deeds Office. It includes general disbursements (postage, petties etc.) and is subject to VAT at 15%.

“Conveyancers’ transfer fees are based on guidelines issued by the Legal Association of South Africa,” said Jacobs. “They’re calculated on the purchase price of the property, ranging from around R16,000 ex VAT for a R500,000 property, to R57,000 ex VAT and up for properties over R5 million.”

  • Pro Tip: Conveyancing fees vary by practitioner and are often negotiable to a certain extent. Jacobs said it’s well worth speaking to the appointed attorney (typically chosen by the seller) before agreeing to their fee. It’s also an option to request the seller appoint a specific conveyancer that you know and trust to handle the purchase process.

Deeds Office Fee

The Deeds Office charges an administrative fee for receiving and processing documentation from your conveyancer and registering the transfer of ownership of your property.

“This fee is calculated based on the value of the purchase and ranges from around R700 for properties of R500,000 to R5,700 and up for purchases over R30 million,” said Jacobs. “Normally, your conveyancer will bill you for this fee and transfer it to the Deeds Office on your behalf.”

Transfer Duty

Transfer Duty is a tax levied by SARS on property purchases, and is normally one the biggest extra costs buyers need to prepare for.

“Transfer duty is calculated as a percentage of the property value over R1 million,” said Jacobs. “If your purchase is under R1million, no transfer duty is due.”

You can find the SARS Transfer Duty table here, or use an online transfer cost calculator to get an accurate figure. Budget for around R50,000 on a R2 million property, and R366,000 for a R5 million property.

  • Pro Tip: The only way to avoid paying Transfer Duty is to buy directly from a developer or similar property professional. This isn’t always the cost saving it appears, however. Purchases that are not subject to Transfer Duty are, instead, subject to VAT, which can sometimes be higher than Transfer Duty on an equivalent property.

Bond Costs

Registering Attorney fees

Just like your conveyancing attorney, the attorney responsible for registering your bond will charge a professional fee and general disbursements, plus VAT. This fee is also based on guidelines issued by the Legal Society of South Africa and is calculated on the size of the bond you’re opening.

“Bond fees can vary by property type as well as value,” said Jacobs, “as the additional complexities around sectional titles, for example, can incur additional costs. Budget for around R15,000 ex VAT for a R500,000 bond, and R55,000 ex VAT for a R5 million bond. Again, don’t be afraid to ask for a discount – these fees aren’t set in stone and are often open to some negotiation.”

Bond initiation fee

Your bank will also charge an administrative fee for initiating your bond and opening your bond account.

“This fee varies by lender,” said Jacobs. “Some banks charge a fixed fee of around R6,000, others charge a base fee plus a percentage of the loan amount.”

  • Pro tip: Your bond initiation fee can be included in your loan amount if necessary. It’s a good idea to pay it upfront if possible, however, to avoid accumulating unnecessary interest.

Deeds Office fee

The Deeds Office will also charge a fee to register your bond over the title deed. This fee is normally paid to your bond attorney, who will transfer it to the Deeds Office as part of their service.

“This fee is also based on a sliding scale, and ranges from around R400 to over R6,000 depending on the size of your loan,” said Jacobs.

Monthly Bond administration fee

There are ongoing costs associated with bonds as well. Jacobs warns buyers not to be surprised by the extra R60 to R80 administration fee added to their bond repayments each month.

Insurance Premiums

Most lenders require buyers to take out Bond Protector Insurance and Homeowner/Building Insurance as a prerequisite for their loan. Many buyers will also want to add household contents insurance to that line-up to protect their possessions against fire, theft and other disasters.

“It’s almost impossible to give ballpark figures for insurance, since costs vary wildly by provider, property and buyer profile,” said Jacobs. “I’d suggest budgeting at least a few hundred rand for smaller properties, and a few thousand for larger or more expensive homes.”

  • Pro Tip: Many lenders offer in-house insurance to bondholders. However, there is no obligation to use these products over equivalents from outside insurance providers. It’s always a good idea to shop around for the best premiums and coverage rather than simply signing up for whatever your bank offers alongside your bond documents.

Property Costs

Even your property comes with a few hidden expenses. Jacobs reminds buyers to budget for monthly rates, taxes and levies, as well as water and electricity, garden and home maintenance, and subscription costs like security services.

“Don’t forget things like window coverings, either,” he added. “Blinds and shutters are considered fixtures and will normally be left in place by the seller, but curtains are usually removed and will need to be replaced. That can be a surprisingly large – yet unavoidable – expense.”

Moving Costs

The final cost that often gets forgotten in the excitement of a property purchase is the move from your current home into your new one.

“If you don’t have much stuff and have access to a bakkie or other utility vehicle, you might get away with a move that costs nothing more than a tank of petrol, a few boxes and some bubble wrap,” said Jacobs.

“For most of us, however, a professional removals company is a must. These can cost several thousand rand depending on how much and how far you’re moving. If you’re semigrating or immigrating, that cost goes up exponentially.”

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The true cost of buying a house in South Africa, including hidden fees