Possible in both ways. It depends on the context. フランスはドイツの南にある; Unless the listener left his brain behind, he understands France is located south of Germany. ブラジルは地球の南にある; Like the above, it’s unlikely that the listener understands Brazil is a planet floating in the south of the Earth. 私の家は町の南にあります; Although it sounds natural, tough to tell alpart. When to clarify, the possible sayings are as follows. 私の家は町から南にあります; it states the house is not in the town. 私の家は町の南側にあります; my house is on the south side of the town.