A smarter way to purchase property as a non-resident in South Africa
Non-resident buyers can reduce currency risk when buying property in South Africa by using forward contracts to lock in exchange rates and budget with confidence.
Buying property in South Africa as a non-resident often means transferring money from abroad, and with the rand constantly shifting, that dream home could cost more (or less) in your home currency by the time that payment is due. A forward contract helps you lock in today’s exchange rate for use at a later stage, removing uncertainty and helping buyers budget with confidence.
According to Adrian Goslett, CEO and regional director of REMAX Southern Africa, a forward contract allows buyers to secure an exchange rate now and complete the transfer months later, even if the property purchase is still in progress. “A forward contract offers certainty over the final cost in the buyer’s home currency, while protecting against the risk of the rand strengthening before payment is made.”
There are two types of forward contracts available, depending on the buyer’s needs and purchase timeline. As explained by Currencies Direct, the first is a fixed forward contract which allows buyers to lock in one exchange rate and applies it to the full amount on a specific date in the future. The second option is an open forward contract while allows buyers to lock in an exchange rate while choosing a flexible payment window.
“Even if you haven’t located the right home, you can secure your exchange rate early. With us at Currencies Direct, you simply open an account and then identify the amount you want to hedge in the local unit i.e. ZAR. You can then select the open forward and choose a sensible time window for example 3-6 months. You pay a 10% deposit towards this contract and then the rate is locked and confirmed.”
Currencies Direct further explains that when funds are needed, the buyer can draw down the required amount. Funds can be paid directly to the conveyancer’s trust account or to a South African non-resident bank account.
If a buyer’s plans change, the contract can potentially be extended depending on market conditions. Should the buyer choose to cancel, the difference between the locked-in rate and the current market rate will need to be settled.
“For non-resident buyers, this kind of certainty can be invaluable. A forward contract protects against currency volatility, makes budgeting more accurate, allows flexibility throughout the buying process, and reduces the pressure to transfer a full amount on one specific day,” concludes Goslett.
If you are an international buyer actively searching for property, or simply monitoring the South African market, explore your options and work with a global brand with global connections to help make the process easier.