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No moratorium for foreign property buyers
Chris Nthite and Dikatso Mametse
20 February 2006
Government has decided against a report suggesting that a moratorium on the sale of land to foreign property buyers be imposed with immediate effect.
Agriculture and Land Affairs Minister Thoko Didiza overturned her panel’s report on Foreign Land Ownership last Friday saying that she would first have to study the report on The development of policy on the regulation of ownership of land in South Africa by foreigners before making any final decisions.
The report follow the announcement in Thabo Mbeki’s State Of The Nation Address that there would be some form of regulation on foreign ownership. The question is when.
The preliminary report was released last Friday, Mandla Mabuza, a spokesperson for the panel told Moneyweb yesterday that the final report is due to be released in April.
In the meantime he said that the panel encouraged public debate on the issue, which would be considered during the drafting of the final report.
The report investigates, amongst others:
- The nature, extent, trends and impact of the acquisition and use of, and investment in land in South African by non South African citizens.
- It also looked at the extent to which the current lack of a comprehensive policy and legislative framework contributes to the acquisition, use and investment in land by non-South African citizens.
- Whether the government should monitor and intervene by policy, legislative and other means, in preventing any possible negative consequence of land acquisition or use by non South African citizens.
- The impact on the property markets on land acquisition and use by non-South African citizens, distinguishing between land use for residential, commercial, agriculture, eco-tourism/tourism/game lodge and golf course purposes
- And comparative international practices on the issue of land ownership by non-citizens.
Mandla said that the report effectively says that if government doesn’t intervene immediately as far as regulating foreign ownership of land is concerned, government will encounter problems around land reform and land restitution.
As a result, the panel of experts recommends that a moratorium on the purchase and sale of South African land to non-citizens be imposed with immediate effect, as an interim measure until appropriate legislation has been promulgated.
The panel, led by professor Shadruck Gutto, recommends certain reporting requirements aimed at improving the information flow on foreign ownership.
It recommended ministerial approval of certain land transactions and a change in the way land is zoned and land use approved.
The panel’s call triggered widespread negative reaction.
The Telegraph reported, “the era when Britons were free to acquire farms and homes in South Africa was drawing to a close.
John Loos, FNB’ property economist, cautioned that reports such as this send a wrong signal and create a confidence crisis for investors. “Some may ask themselves, it’s land now, what’s next?”
Barak Geffen, executive director of Sotheby’s International Realty, also argues that a tightening up of foreign investors’ property ownership policies would put a dampener on economic growth.
“Foreign investors should be encouraged to invest in South Africa and we should be making it easier, not more difficult, for foreigners to bring skills and capital to SA to help grow the economy,” said Geffen.
“One need only look at the Australian example to see how foreign investors can help to uplift the standard of living for all South Africans.”
Geffen also argues that the concern about foreign property ownership out-pricing local investors from our property market was unfounded.
“Foreign buyers account for only about 5% of all the property sales in South Africa – so it’s still local buyers who are setting the trend. They drive demand and supply, which determines prices.”
According to Geffen, any economy should be viewed as a macro-business that can compete globally only by attracting the best talent pool from around the world.
‘These professionals actively contribute to these economies; this is what attracts further investment, adding to the country’s success, creating wealth for all.”
Andrew Golding, CEO of Pam Golding Property group, said foreigners do not pay inflated prices for property in South Africa, but prices are determined by local market conditions and factors.
“In any given year, South Africa residential property sold to foreign buyers amounts to less than 1% of the country’s total residential property sales value.”
These statistics are available at the Deeds Office, said Golding. “It is a misconception that foreign buyers are pushing up property prices. Generally, the price range of homes they are interested in is predominantly in the R1m, R2m or R2,5m range and in varied locations and regions around the country.”
The panel’s preliminary findings revealed that foreign individuals own 1% of urban, 0,6% of farmland, nearly 2% of agricultural holdings and 3% of sectional titles in terms of count or units.
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