How to buy property in Johannesburg: the checks behind a sound property investment

Deciding to buy property is the easy part. Buying the right property, at the right price, with no surprises after transfer, takes a method. This guide sets out that method for Johannesburg, for owner-occupiers and for anyone treating a purchase as a property investment.

Step 1: Decide what the property is for

Three purposes, three different sets of priorities.

A home. You will live there, so fit matters most: location, schools, commute, space. Resale value still matters, because circumstances change.

A rental investment. The numbers come first. Net income after all costs, vacancy risk, and the prospects for capital growth.

A development opportunity. The land and its rights are what you are buying. The existing house may be worth little to you.

Be honest about which you are doing. Problems start when a buyer pays a home buyer's emotional price for an investment.

Step 2: Work out what you can really afford

The purchase price is only the start.

• Deposit.
• Transfer duty, on a sliding scale by price.
• Conveyancing fees for transfer.
• Bond registration costs and the bank's initiation fee.
• Moving and immediate repairs.
• Ongoing: bond repayments, rates, services, levies, insurance, maintenance.

On many purchases the once-off costs add a meaningful percentage to the price. See transfer costs and duty: the full breakdown. The investment calculators on property pages at checkproperty.co.za work through transfer duty, bond repayments and yield from the figures you enter.

Get a pre-approval from a bank or bond originator before you start viewing. It tells you your range and strengthens your offer.

Step 3: Choose the area with evidence

Shortlist suburbs on what matters to your purpose, then test each against the record.

• What have properties actually sold for there recently? See property sales history.
• How wide is the range of prices?
• What is the mix of freehold and sectional title? See freehold versus sectional title.
• What does planning policy intend for the area? See densification in Johannesburg.

Area guides: Sandton and Randburg, Roodepoort and Midrand.

Step 4: Screen each property before you fall for it

Before the second viewing, spend ten minutes on the facts.

1. Search the address and confirm the erf, its boundary and its registered size. See erf size lookup.
2. Check the zoning. See zoning check.
3. Look at the sales history and comparable sales.
4. Check the site constraints: floodlines, dolomite, soil.
5. Compare the boundary with the aerial image for anything that looks out of place.

A property report from checkproperty.co.za covers these for a Johannesburg erf. Most unsuitable properties can be ruled out at this stage, before you have invested emotion or professional fees.

Step 5: Judge the price

Work out what the property is worth to you before you hear what the seller wants to accept.

• Use recent registered sales of similar properties nearby. See comparable sales reports.
• Adjust for differences in size, condition and position.
• Arrive at a range, and decide your ceiling in advance.

See how much is my house worth for the method. The municipal valuation is not a guide to price; see municipal valuation vs market value.

Step 6: Inspect and ask for documents

On site, more than once and at different times: traffic, noise, how the neighbours use their properties, where water runs in the rain.

From the seller:

• approved building plans for all structures;
• the mandatory disclosure form;
• for sectional title: levy statement, financials, rules and recent minutes;
• for a rental: the lease and proof of rent received;
• details of any guarantees or recent major work.

From professionals, where warranted: a home inspection; an engineer for cracks, floodlines or ground conditions; a town planner where your plans depend on rights.

Missing plans are the single commonest problem in Johannesburg sales. See unapproved structures: what a buyer inherits.

Step 7: Make a protected offer

An offer to purchase becomes a binding contract once accepted. Get it right before you sign.

• Suspensive conditions — bond approval; sale of your existing property if needed; satisfactory inspection or specialist reports.
• Fixtures and fittings listed.
• Occupation date and occupational rent.
• Seller's warranties on plans and compliance where you can negotiate them.
• Who appoints the conveyancer — by custom the seller, though it is negotiable.

If anything is unclear, have an attorney review the agreement before you sign. A short consultation costs little relative to the purchase.

Step 8: Transfer

After acceptance: bond approval, signing of transfer and bond documents, payment of transfer duty and costs, rates clearance, compliance certificates, and lodgement in the deeds registry. Registration typically follows some weeks to a few months after the sale.

Watch for arrears on the municipal account; see municipal account arrears: the transfer-day trap.

Property investment: the extra discipline

If the purchase is an investment, add these.

Net yield, not gross. Annual rent less levies, rates, insurance, maintenance, management fees and an allowance for vacancy, divided by total acquisition cost. See rental yield, the honest way.

Cash flow. Will rent cover the bond and costs? If not, how much will you contribute monthly, and for how long?

Growth evidence. What has resale growth been for this type of property in this suburb?

Supply. How many competing units are there, and how many more are coming? See new developments and off-plan risk.

Optionality. Does the erf have potential beyond its current use — a second dwelling, a subdivision, higher density? See what can I build on my property. Potential you have checked is an asset; potential you have assumed is a risk.

Tax and structure. Rental income is taxable, and the way you hold property has consequences. Take advice.

Exit. Who will buy this from you, and why?

Mistakes that cost Johannesburg buyers most

• Not checking the erf — size, boundary, zoning.
• Trusting the advert on rights: "can subdivide", "business potential".
• Buying a house with unapproved additions.
• Ignoring flood and ground conditions.
• Underestimating once-off and running costs.
• Taking gross yield at face value.
• Skipping scheme records on a sectional title purchase.
• Signing first and checking later.

Every one of these is avoidable with checks that cost little.

A short checklist

• Purpose clear
• Budget including all costs; pre-approval obtained
• Area chosen on sales evidence
• Erf, size, boundary and zoning confirmed
• Sales history and comparables reviewed
• Constraints checked
• Plans and documents obtained
• Inspection done
• Offer with proper conditions
• Agreement reviewed before signing

The full version is in property due diligence: a complete checklist.

Frequently asked questions

Can a foreigner buy property in South Africa? Generally yes, subject to exchange control and financing rules. Take advice specific to your circumstances.

Should I buy in my own name or in a trust or company? It depends on tax, estate planning and financing. Ask a tax adviser before signing; changing later is costly.

How long does a purchase take? From accepted offer to registration, commonly two to three months, depending on finance and the parties.

The bottom line

Buying property well is a sequence: know your purpose, know your budget, choose the area on evidence, screen each property on the facts, judge the price from sales, inspect, and offer with protection. For an investment, add honest numbers on yield and cash flow.

Check a property before you offer.

This is general information, not legal, financial, tax or investment advice. Consult appropriately qualified professionals before buying.