Step-by-step guide to buying property in London
for South African homebuyers & investors

Arranging your finances

As a South African citizen, before you begin the process of purchasing a property, it is crucial to plan your finances meticulously and prepare for fund transfers from your domestic bank account. To ensure a smooth and well-informed property search, we highly recommend arranging your finances in advance, determining how much money you can allocate for the purchase within the fiscal year. By taking this proactive step, you will have a clear understanding of your budget and be better prepared to explore suitable properties.

There are multiple ways through which a South African national can own a property in London:

• Purchased with remittances made under the authorised foreign exchange channels. South African residents can utilize the Foreign Capital Allowance, which allows for an annual transfer of up to R11 million (R1 million single discretionary allowance and a further R10 million foreign capital allowance) per individual for investment purposes, including property acquisition.
• South African individuals categorised as residents abroad (non-residents) can also purchase property overseas under the regulations outlined by the South African Reserve Bank.
• In cases of inheritance, South African nationals can acquire property in London by paying an Estate Duty between 20%-25% depending on the value of the property.
• Utilising funds held in the Foreign Currency Account (FCA) of the resident maintained in South Africa, property purchases can be made in London.
• Joint ownership with a relative is permissible, provided that no funds are transferred from South Africa for the acquisition.
• South African companies, either as a subsidiary (or extension) of the company based in South Africa or as an operational UK company, can acquire property for business purposes or staff housing.

It is important for South African nationals to consult with relevant authorities, such as the South African Reserve Bank (SARB) and South African Revenue Service (SARS) to ensure compliance with foreign exchange regulations and to seek professional advice on the specific requirements and procedures for owning property in London.

Mortgage eligibility

The mortgage eligibility for South African nationals is subject to certain regulations and considerations. Here’s what you need to know:

• SARB regulations: South African nationals looking to obtain a mortgage for a property in London should comply with the regulations set by the SARB regarding foreign investments and foreign exchange controls.
• Mortgage restrictions: South African nationals are required to get approval from the SARB in order to obtain a mortgage for immovable property located outside of South Africa.

To facilitate mortgage payments and rental income deposits, you will need a UK bank account. Certain lenders may require you to travel to the UK for this purpose, while others may accept proof of identity through a certified notary or solicitor in South Africa.

Deposits, mortgage payments, and mortgage brokers:

Lenders typically require a deposit of 25% or more of the property's value. A higher deposit can result in a lower mortgage interest rate. Engaging a mortgage broker can be beneficial, as they can help you explore foreign resident buy-to-let mortgages that offer favourable terms, flexibility, and interest-only options.

Documentation

When buying a property in the UK as a South African investor, you will require the following documents, with all buyers' names included:

• Proof of identity: Current Passport (Valid UK visa is not mandatory)
• Proof of address: (any one, dated within the last three months) - Utility Bill, Driver's License, Bank, Building Society, or Credit Union Statement, Tenancy Agreement
• Proof of funds: 3-6 months' bank statements from the account from which the funds will be remitted for the property purchase.
• Supporting documents to show the source of funds: Accumulated income over time from sources such as Salary, Business Income, Gifts, Fixed Deposits, Sale of Property, Sales or Liquidation of Investment Portfolio, Company Profits, Dividend Payment, Inheritance, Insurance Policies, Retirement Income, etc.

All these documents need to be certified by a currently practicing professional, such as:

• Licensed Conveyancer or Solicitor
• Chartered Accountant with a practicing certificate
• Qualified lawyer or Attorney
• Notary

Ensure that all the required documents are properly prepared, certified, and available when engaging in the property purchase process in the UK as a South African investor.

Narrow down your search

With our local offices in South Africa, we strive to simplify the process of purchasing property in the UK. However, before proceeding, it is important to consider the following parameters:

• Purpose of purchase: Determine whether you are buying the property for your own personal use or for investment purposes.
• Size: Identify the desired number of bedrooms and bathrooms.
  (Note: For investment purposes, one and two-bedroom properties tend to have higher rental demand and better rental yields)
• Location: London comprises 32 different boroughs, so it is crucial to pinpoint the specific area where you intend to purchase the property
• Type of property: Decide whether you want an older property, a brand-new property purchased off-plan (with completion in the future), or a recently completed property within a new development.

Understanding Leasehold - It is important to note that many properties in London are leasehold, but this does not mean you do not own them. Leasehold properties typically exist so that many people live in the same building and share the responsibility of repairing the building structure, roof, and communal areas. Lease terms vary, but most new developments now offer leases ranging from 125 to 999 years.

Know your budget

There is a double taxation agreement (DTA) in place between the UK and South Africa. Under this agreement, any rental income earned by a South African resident from properties in the UK will be subject to taxation in the UK. However, no further tax liability will arise in South Africa (subject to specific exemption conditions). It is important to note that South African residents who are not UK residents are not eligible for a personal allowance in the UK.

Once you have determined your budget and the amount you intend to remit from your South African bank account to purchase a property in the UK, it is essential to consider the additional costs associated with the purchase. These costs include:

• Purchase price: The actual price paid for the apartment after any applicable discounts from the developer or seller.
• Legal fees to the UK solicitor: Typically ranging from £1,800 to £4,000, depending on the property area and value.
  In the UK, property documentation must be prepared and reviewed by UK solicitors exclusively.
• Property maintenance charges:
  • Annual Service Charge: Estimated at £3-6 per sq ft.
  • Annual Ground Rent: Estimated at £200-600.
  • These charges are paid annually to the developer for property maintenance.
    (For the first year, they are typically paid in advance along with the property purchase price.)
• Stamp Duty land tax (SDLT):
  

  Applicable for Non-UK Resident Individuals:

  • Property value up to £300,000: Tax rate of 6.67%, equivalent to £20,000.
  • Property value up to £500,000: Tax rate of 8%, equivalent to £40,000.
  • Property value up to £700,000: Tax rate of 8.57%, equivalent to £60,000.
• Miscellaneous disbursements:

  Approximately £500 to £700.

  Includes miscellaneous transaction charges to be paid to the solicitor or other parties. Examples include insurance fees, developer's solicitor engrossment fees, search or due-diligence fees, and transaction handling charges.

• Mortgage lender's fees:

  Approximately 1% of the loan amount. This fee is payable to the mortgage lender if you require financing for the property purchase.

• Furnishings (Optional):

  Our in-house furnishings arm offers services catering to various home design preferences.

It is crucial to be aware of these additional costs when planning to buy a property in the UK. Our team is available to assist you throughout the process and provide further guidance.

Viewing & shortlisting properties

When it comes to short-listing properties and making informed decisions, viewing plays a crucial role. Once you have narrowed down your options, our team is here to assist you in arranging viewings.

We offer two options for viewings:

• Physical viewings:

  We have 19 local offices that cover the all of London, along with a team of property experts. They can organise in-person property tours for you. Upon receiving your travel dates to London, we can arrange a tailoured itinerary for guided physical tours of the properties you have shortlisted. These viewings will provide you with a first-hand experience of the properties, their amenities, and the surrounding areas.

• Virtual viewings:

  Our team can discuss all the property details with you virtually through video calls using platforms like Zoom or WhatsApp. We can provide you with a personalised one-to-one virtual tour of the properties you are interested in. This includes viewing photos, videos, floor plans, layouts, strategic apartment selection, and even the views from the apartments and the development.

Making an offer & reservation

Once you have made your selection of the desired property, we will guide you through the process of presenting your offer to the developer or seller.

Before making an offer, there are a few important factors to consider:

• Resale or completed properties: When making an offer on a resale or completed property, you will be required to provide full payment upon making the offer and exchanging contracts. On the other hand, for under-construction properties, the payment structure is typically staged and aligned with the development timelines.
• Under-construction or off-plan properties: To secure your preferred property, you will need to pay an initial reservation fee, often referred to as token money. This payment serves to reserve the property for you. Following the reservation, you will have a period of 28 days to exchange contracts and make a payment of 10% of the property purchase price.

Instructing your solicitor

In the UK, all property transactions require the involvement of a solicitor. We have established relationships with various independent lawyers who specialize in property transactions and can provide you with a recommended list of experienced solicitors or conveyancers. Once you have reserved a property, your solicitor or conveyancer will handle all the necessary documentation and ensure that your interests are protected throughout the purchase process of your new home.

To assist your solicitor or conveyancer, you will need to provide the following documents:

• Proof of identity: A current passport (A valid UK visa is not mandatory).
• Proof of address: This can be demonstrated through a utility bill, driver's license, bank statement, building society statement, credit union statement, or tenancy agreement. The document must have a date within the last three months.
• Proof of funds: You will be required to provide 3-6 months' worth of bank statements from the account from which the funds will be remitted for the property purchase.
• Supporting documents to verify the source of funds: These documents should demonstrate the accumulation of funds over time, such as income from salary, business income, gifts, fixed deposits, sale of property, sales or liquidation of investment portfolio, company profits, dividend payments, inheritance, insurance policies, retirement income, and so on.

Acceptance of the offer

• Once your offer is accepted by the seller, you will be required to pay the reservation fee and sign the reservation form as part of the property purchase process.
• After the reservation is completed, your solicitor will begin preparing the necessary documents for the exchange of contracts.
• It is important to note that the exchange of contracts must take place within 28 days from the date of reservation or as agreed upon during the reservation process.
• As the buyer, it is your responsibility to ensure that the deposit amount is easily accessible and available for the exchange of contracts.
• Upon completion of the property transaction, or at a later agreed-upon possession date for properties under construction, you will need to have the funds readily available to cover the total purchase amount, minus the deposit that has already been paid.

Conveyancing

Conveyancing is an essential process facilitated by a lawyer or solicitor that oversees the buying and selling of properties in the UK. The following steps are included in the usual conveyancing process:

• The seller's solicitor provides your solicitor with a copy of the Title Deed, which contains the legal terms and conditions associated with the property.
• Your solicitor or conveyancer will handle all the necessary documentation and ensure your interests are protected throughout the purchase of your new home. They will also raise any queries or concerns on your behalf.
• Solicitors can also conduct local searches to gather information about the property, such as its surroundings, and inquire about the furniture, fixtures, and facilities provided within the development or property.

Exchanging contracts

Up until this stage, the progress made by both the buyer and seller was not legally binding. However, after the exchange of contracts, both parties are legally obligated to adhere to the agreed terms and conditions.

• Typically, the exchange of contracts occurs within 28 days from the reservation date.
• At the point of contract exchange, the agreed deposit, usually ranging from 10% to 20%, is paid.
• In the case of off-plan or under-construction properties, the payment is typically made according to predetermined timelines that have been agreed upon.

Snagging or inspection of the properties

When it comes to off-plan properties, especially if you are a first-time owner, it is crucial to inspect before the property is handed over. This process is commonly referred to as snagging or pre-inspection.

• Typically, an inspection meeting is arranged with the developer, during which a snag list is provided. (This list comprises a comprehensive inventory of items that require attention or rectification. It includes any unfinished or unsatisfactory work that needs to be addressed, ranging from minor issues like paint splatters to more significant concerns such as faulty doors or leaks.)
• During the inspection meeting, the developer will demonstrate all the features of the purchased property to you. This includes showcasing the functionality of the central heating and hot water systems, lighting, switches, electrical consumer units, and more. If any deficiencies or shortcomings are identified, they can be brought to the developer's attention for resolution.

Completion of purchase

Completion is the stage where you make the final payment to your solicitor, which is calculated as the Total Purchase Price minus the Deposit paid on exchange. This remaining balance payment is then transferred by your solicitor to the seller's solicitor's account.

Congratulations will then become due for completing your purchase and becoming the legal owner of a property in the UK!

Stamp duty

After the property purchase is finalised, you will need to complete your obligation of paying Stamp Duty, which is a percentage of the property value. This payment should be made within 14 days of exchanging the contracts. Your solicitor will calculate the exact amount of Stamp Duty and also handle the preparation of your stamp duty land tax return.

Click here for UK property and buy-to-let stamp duty tax calculator

One-stop service

• Furnishing & refurbishment: InStyle Direct, a sister company of Benham & Reeves, specialises in comprehensive furnishing and interior design solutions for both investment properties (with cost-effective designs to attract tenants) and self-use properties (providing complete interior design solutions). In addition, InStyle Direct offers refurbishment services, including painting, bathroom or kitchen upgrades, and even complete renovations, all handled by their dedicated in-house team.
• Lettings: We provide top-notch lettings services, ensuring we find high-quality tenants who are willing to pay competitive rents. With our 19 offices located throughout London, we have extensive coverage of all areas that investors are interested in buying and letting.
• Management: Our dedicated team takes care of rent collection, ensuring it is promptly deposited into your account. We also handle any maintenance issues that may arise and ensure that tenants responsibly maintain the property.
• Bill payments: We take the hassle out of managing service charges, ground rent, and utility bills by handling the payments on your behalf. You can rest assured that these essential expenses are taken care of without any inconvenience to you.
• Tax return service: As part of our comprehensive services, we also offer assistance with the preparation of personal tax returns for our overseas clients. We understand the complexities involved and ensure that your tax obligations are met efficiently and accurately.