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What and which are property transfer costs?
Whether it’s your first house or a new addition to your real estate portfolio, purchasing a home is an exciting milestone. But, in the excitement of looking at properties and putting in an offer to buy, it’s important to understand what goes into the purchase beyond the asking price. Understanding the numerous costs related to South African real estate transactions is crucial to navigating this process with ease and avoiding needless stress. Generally speaking, potential purchasers should set aside 8% to 10% of the purchase price of the property to pay for these extra expenses, which include bond registration fees, transfer duty, transfer costs, and legal fees.
Differentiating Transfer Costs and Transfer Duty
Property buyers must comprehend the distinctions between transfer expenses and transfer duty in order to successfully negotiate the complexities of real estate transactions. To fully grasp each concept’s ramifications, including financial ones, let’s take a closer look at it:
What Are Transfer Costs?
The fees paid to a transferring attorney, chosen by the seller to supervise the buyer’s acquisition of the property, are included in the transfer costs. These costs, which are the buyer’s responsibility, include a number of elements that help ensure a smooth transition. Some important components of transfer costs are:
Conveyancer Fees
These sums cover the professional costs paid to the transferring attorney for the conveyancing services rendered. In order to facilitate property transfers, guarantee legal compliance, and protect the interests of all parties involved in the transaction, conveyancers are essential.
Incidentals
Postage, stationery, and administrative overheads are a few examples of the various expenditures associated with administrative duties that may be included in transfer costs. Even while each of these charges might not seem like much, taken as a whole, they add up to the buyer’s overall transfer expenses.
Value-Added Tax (VAT)
Value-Added Tax (VAT) is applied to some transfer charges, including incidentals and conveyancer fees. To guarantee appropriate financial planning and budgeting, buyers should include the VAT component in their total transfer expenses calculation.
Usually in the form of a proforma account, transferring attorneys give purchasers an upfront, detailed analysis of transfer expenses. This breakdown ensures openness and well-informed decision-making throughout the purchase process by helping buyers anticipate and budget for the financial obligations related to purchasing real estate.
What Is Transfer Duty?
Conversely, transfer duty is a tax levied on the sale of fixed properties that were obtained through transactions or other ways. When the property is transferred from the previous owner to the new owner, the buyer is responsible for paying this tax obligation to the South African Revenue Service (SARS). Important facets of transfer duty consist of:
Taxation Threshold
Only properties valued at more than R1,100,000 are subject to transfer duty. Buyers of relatively lower-priced homes benefit from the exemption from transfer duty applied to properties below this threshold.
Electronic Payment Requirement
All transfer duty payments are required to be done electronically through SARS’s eFiling web platform as of April 1, 2011. By reducing administrative processes for both buyers and conveyancers, this electronic payment solution improves the transfer duty payment process’s efficiency, transparency, and compliance.
Property buyers might better understand the financial ramifications of real estate transactions by making the distinction between transfer charges and transfer duties. Transfer duty is a tax imposed on property sales that surpass a predetermined threshold, whereas transfer costs are the professional fees and incidental charges incurred during the transfer procedure. Buyers who are aware of these differences are better equipped to plan ahead financially, make educated judgments, and handle real estate transactions with assurance and clarity.
Current Transfer Duty Rates
According to SARS, the transfer duty rates that apply to real estate transactions in South Africa from March 2024 to February 2025 are as follows:
| Value of the Property (R) | Rate |
| 1 – 1,000,000 | 0% |
| 1,000,001 – 1,512,500 | 3% of the value above R1,000,000 |
| 1,512,501 – 2,117,500 | R12,375 + 6% of the value above R1,512,500 |
| 2,117,501 – 2,722,500 | R48,675 + 8% of the value above R2,117,500 |
| 2,722,501 – 12,100,000 | R97,075 + 11% of the value above R2,722,500 |
| 12,100,001 and above | R1,128,600+ 13% of the value exceeding R12,100,000 |
Inclusion of transfer fees in a bond
First-time purchasers have the option of purchasing a 105% bond, with the extra 5% going toward other expenses such bond registration and transfer fees. Although this arrangement does away with the requirement for up-front payments for bond registration fees and a deposit or transfer, these charges are added to the loan amount and result in higher monthly installments.
Exemptions from Transfer Duty
Buyers are relieved of this financial burden under specific circumstances where they are not required to pay transfer duty. For property buyers to maximize their financial planning and guarantee compliance with pertinent legislation, it is imperative that they comprehend these exemptions. Let’s take a closer look at these exclusions:
Marriage In Community
When two people get married in a community of property state like South Africa, they immediately inherit half of whatever property each spouse possessed before the marriage ever began. Most importantly, there is no transfer duty associated with this acquisition. This exception intends to promote smooth property transfers within the framework of marriage by acknowledging shared ownership of marital assets.
Inheritance
Regardless of their link to the deceased or the presence of a legal will, beneficiaries and heirs who inherit property from a deceased estate are free from transfer duty. This exemption attempts to lessen the financial constraints connected with property transfers in such cases, acknowledging the transfer of property through inheritance as an extension of the deceased’s estate.
Divorce
Regardless of the marital regime or civil union, transfer obligation is avoided when property is awarded to a spouse as part of a divorce settlement. This exemption attempts to promote equitable distribution without placing new tax obligations on the transferring spouse by acknowledging the division of marital assets during divorce procedures.
Canceled Transactions
There is no transfer duty obligation when a property transaction is canceled prior to transfer registration at the Deeds Office. To guarantee the validity of the cancelation, the South African Revenue Service (SARS) may verify this exemption. This clause protects purchasers from needless tax obligations in cases where real estate deals fall through for justifiable reasons.
Considerations for transactions with conditions
Transfer duty must be settled within six months following the conclusion of a sale transaction, according to South African legislation. Although this schedule generally corresponds with the sale and transfer procedure, purchasers must guarantee prompt payment in the event that the deal goes over the six-month mark.
Plan ahead for property transactions
Estimating transfer duties and bond registration charges is crucial when putting in an offer on a property because these fees have to be paid in full after the offer is accepted. Convenient calculators are available on websites like BetterBond’s to help with proper cost estimation. For additional advice on completing real estate transactions and achieving your dream of becoming a homeowner, speak with experienced real estate agents. Encouragingly and clearly, you may start your property ownership journey with careful planning and well-informed decision-making.
