South Africa No Longer A Retirement Destination For Foreigners
South Africa or more precisely Cape Town over the last few years has been growing in popularity as a desired retirement destination. The Cape Town region has around 400 000 -500 000 foreign pensioners with the UK leading the way with roughly 60%. This has helped inflate local property prices especially in the upmarket areas. This has bought $ billions of investment into the region with many of the more expensive properties being purchased by retiring foreigners.
The plusses is the cost of living in comparison to Europe or the States as the exchange rates are very favorable. The idea of living a comfortable retirement will make the pensions stretch that much further reducing any financial worries. Private medical is not expensive when converting currencies and is world class. There is no major language barriers with English the spoken language. The weather and climate is also very good and having so many other expat retirees around it has become a home from home for many.
This above sets the picture of what was a hassle free retirement for the 500K retirees living in the Cape up until yesterday the 12th September. Financially the Cape was a favorable destination as foreign pensions were exempt from taxation.
Back in 2000 the South African Treasury passed a bill making foreign pensions exempt from tax sating there were too many pitfalls taxing foreign pensions. At the time they stated that it could discourage investment when relocating and buying properties.
The problem is when you look at foreign pensions they cannot be compared to local pensions and local tax rules. Back in 2000 when this pension tax exemption was introduced the government said this would be reviewed and amended depending on the economic impact once studies had been done. No studies have been done and foreign pensioners will be taxed from March 1st 2026.
The 300K plus UK pensioners who had a double tax exemption with SA falls away and will be subject to a 45% tax rate. This is going to apply to everyone with a foreign pension and kind of changes things for those who have planned their retirement. Many are now looking to sell up and leave and this is going to impact the Cape economy. The housing market will be flooded with new homes for sale and no foreign buyers who would be normally snapping them up. Any investments in businesses will also be heading out the country so this is going to have a knock on effect and this government decision is reckless and very short sighted. One can imagine the impact of this region losing 500 000 consumers over the next few months.
This is billions of dollars in retirement capital that is now leaving South Africa and the impact is going to be very noticeable very quickly. Talk about chasing investors away when the country desperately needs investment. What the government has failed to understand is the knock on effect as property prices will drop so less taxes from house purchases. Property development will slow down due to less demand and thus jobs will be lost. This is madness all because the SA Government is desperate to increase their tax revenues and pensioners is an easy target. Little do they realize they are only going to reduce their revenue as all of these people were using local services and were paying vat on all goods.
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I didn't realise there were that many Brits retiring in South Africa. I know it's a beautiful country, but I hear a lot of stories about the crime and safety which was always a concern for me. Where do you think the Brits will go if they leave South Africa? Back to the UK? Or maybe Spain, Portugal or France? Those always seems popular places
Crime in the Cape is not that bad compared to the rest of the country. I have no idea where they will go as compared to SA most places are considered expensive. Language etc everything was favorable and I feel sorry for them having to rethink their retirement now. How many can afford to move is another question.
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STOPPeople, especially expats, are more mobile than many governments think and raising takes this way will only leas to a drain of capital/consumers. This will only expand in the age of digital Assets imo.
That 45 percent rate hitting foreign pensions from March 2026 < with the UK double tax relief gone flips the whole value prop. It's hard to sell the dream of cheap wine and sunshine when the taxman wants half, kind of kills the vibe. Flooding the housing makret as retirees bail means lower transfer duties and less VAT in shops. That might look like easy revenue but it will likely shrink the base fast.
They think that these pensioners do not have the means to move?! One of the only groups of people who HAVE money to move... this means that the Southern Suburbs of Cape Town is going to be emptying out. Without control of who buys... this will cause a further replacement and chain reaction... not good...
The problem is most may have not the means to move now as they will not find the same lifestyle for the same price anywhere else. Selling a high end property in the Southern Suburbs will most likely get you a decent flat in Europe and not anything close. They will move as they have no choice.
Or they will end up moving into cheaper places further away from the City hub... again depriving it of commerce.
Yes they will become a destination shop. The problem with SA is we have too many shopping centers and it dilutes the retailers profitability. I expect many will close or be demolished because that route is unsustainable and expect many more strip type malls to be built.
Less malls and less of the population can be employed in the retail sector... presumably?
This seems so destructive and short-sighted. I'd imagine maybe some pensioners will be too settled to leave immediately, but going from 0 to 45% tax is insane, and I think most will be out as soon as they are able. Not only will this severely hurt the local economy, but it also blatantly goes after older folks who rely on this fixed income because they are at an age where getting a job could be very difficult. A low blow if you ask me.
They are just low hanging fruit and do not care about their ages. With most being white they will feel nothing and maybe hoping to crash the housing market and pick up properties on the cheap. They are jealous of rich old white folk especially those with foreign currency pensions.
Its sad that the government is resorting to these types of tactics. Such a lack of imagination.
Tragic, but from what I hear from my South African friends who relocated here to Vietnam, there are a lot of things that are going wrong over your way.
There is so much wrong and it is slowly deteriorating due to no investment back into the infrastructure. The G20 summit routes are all being fixed up from the airport etc but all the other roads have huge holes everywhere.