Buying investment property in South Africa as a non-resident is surprisingly easy. It’s also a good investment, because property is a stable asset that continues to grow in value over time.

South Africa’s property market is well regulated and financed, presenting foreign owners with a solid investment case, whether you’re buying a house to rent out or a holiday home for your family.

Who qualifies to buy property in South Africa?

Legally, it’s simple enough to buy a house in South Africa as a non-resident. You have the same access as a South African citizen when buying property, although it won’t change your status as a non-resident, and you’ll still need a visa whenever you’re working or holidaying in the country.

If you earn income from the property by renting it out, whether permanently or only during the times that you’re not using it, you’ll be liable for tax as a non-resident – and you’ll be subject to capital gains tax (CGT) if you sell the property.

From a financial perspective, however, if you need to apply for a home loan, there are a few more factors that determine whether you qualify. Affordability is usually the most important, but the size of the home loan you can be granted also depends on your precise status as a non-South African.

The difference between ‘foreign nationals’ and ‘bona fide non-residents’

Nedbank uses the term ‘foreign national’ to refer to a non-South African citizen who is living and working in South Africa. Foreign nationals are eligible for home loans equal to 75% of the value of a property, but you may be able to get more with a suitable written motivation.

‘Bona fide non-residents’, on the other hand, are foreign citizens who are not living or working in South Africa. You can buy property as an investment without needing to visit South Africa in person, but as a bona fide non-resident, you can only qualify for a loan of 50% of the property value; the other 50% you will need to pay in cash.

Assessing affordability on a non-resident home loan

Nedbank will assess your affordability based on what’s called the 1:1 ratio. Explained simply, this means you need to deposit foreign funds equal to the same rand value as the loan in your South African bank account or use a rand-based asset of equal or higher value as collateral.

First, you’ll need to be a client of Nedbank, holding a transactional account with us that receives regular deposits. We will compare your income in rands to your South African debt commitments and expenses to gauge affordability. If you’re being paid in a foreign currency, affordability will be calculated by considering your income, less debt repayments and expenses (including offshore expenses), while making provision for currency fluctuations.

Because the size of your loan is limited to a percentage of the home’s value, you’ll need a deposit of 50% of the asking price. However, given the exchange rate, many non-South Africans with investments in dollars, euros or pounds could well be able to pay the full price of a home in cash. This is where the 1:1 ratio works in your favour.

For example, say you have enough to buy a R4 million property in cash. You could purchase that home outright, then still bond it with a home loan worth R2 million, which you could use to buy a second investment property for cash as well. You could end up with investment property worth R6 million, with only a R2 million home loan to pay off.

One of the benefits of raising finance in the local currency is that it simplifies transactions, because you don't have to hassle with currency conversions and fees. You can have rent paid into a local bank account that’s used for your local transactions and monthly loan instalments.

Nedbank offers home loans of up to 30 years with base lending rates pegged to the prevailing prime rate. Your loan will be offered at a rate below or above this rate, depending on your credit status and portfolio with us.

What is the process?

The process of looking for, bidding on and buying a property will be pretty much the same as if you were a South African citizen, unless you’re not present in the country, in which case you’ll conclude the transaction through proxies or appointed intermediaries. The one other exception applies if you’re married: your spouse will also have to sign all the documents.

But apart from that, your journey will start with a search that you can initiate online before looking for a real estate agent capable of meeting your needs. Using a reputable agent can reduce your stress considerably, especially if you’re not present in South Africa.

If you don’t have a bank account in South Africa yet, this would be a good time to start preparing for your transaction. You can open a non-resident transactional account that you can manage from anywhere using Online Banking or the Nedbank Money app. You’ll be assigned a relationship banker who will be on hand to help with setting up your accounts and preparing financing for your deal.

Once you’ve found the property that you want, your relationship banker can help with processing your online home loan application. This route, rather than through third parties, results in a quicker, smoother process and a greater chance of getting a preferential interest rate on your loan.

How to apply

If you’re an existing Nedbank client, then speak to your relationship banker. If you’re not yet a client, take a look at your Private Clients account options, or apply to open an account by emailing NREB@Nedbank.co.za