Call for clarity on plan to restrict foreign property ownership
Following Land Reform Minister Gugile Nkwinti's announcement that foreign land ownership will be restricted to leasehold once goverment's land policy is passed into law, Seeff chairman Samuel Seeff has called for clarity on the issue.
"From what we can understand, this is a decision taken at the Manguang conference, but it is unclear whether this applies to state of privately owned land. It is also not clear whether this extends to agricultural land only or to residential ownership also", he says.
"Although we agree with the philosophy of restricting the sale of government land, we question the value of restricting private land ownership by foreigners. Foreign property ownership accounts for an insignificant 1 percent of all ownership.
FNB's latest property barometer puts foreign property sales at about 3.5 percent of all sales and, even at the height of 'one of the best proper t y booms in decades' (between 2003 and 2007/8), sales to foreigners were at just over 6 percent. These figures do not take into account that foreigners also sell property, the net effect of which brings this percentage down to about half."
Seeff says it is a misconception that foreigners own the most expensive or best located properties. Even with luxury properties priced above R20 million, the percentage remains between 3 and 4 percent at best. He says the highest price paid for residential property was by local buyers at the One & Only in Cape Town - a penthouse sold for R110m.
"The property sector makes a valuable contribution to the GDP. In 2009, this was estimated at about 8.3 percent, although it is believed to have halved since then, given the influence of the broader macroeconomic environment and lack of incentive to invest, especially for local buyers who make up more than 95 percent of residential sales.
"Aside from attracting foreign investment, foreign-owned property also generates residual income in the form of rates and taxes and utility costs. Foreign property investors have also contributed to vital infrastructure development. Consider for example those who invested in old, run-down wine farms. They injected vital funds into infrastructure development and contributed to the regeneration of these as working farms, retaining the heritage and job creation.
"Most of these owners employ sound labour practices and provide housing and basic services and above- average wages. Another example is the inner- city regeneration of Cape Town that was largely led by Irish investors. This brought about cash flows into the country, infrastructure development and jobs. There is also a knockon effect when foreigners renovate their homes - they create work for architects, builders, artisans, decorators and so on."
Seeff says foreigners mostly buy holiday homes and apartments and many spend the European winters in the country. Importantly, they bring foreign cash into the country.
Though UK and European buyers still account for the largest percentage, Seeff says in the past two years there has been a shift in interest from African buyers.
Similarly, as trade relations continue to strengthen after the country became a part of the Brazil, Russia, India, China and South Africa business communities, he expects growing interest from investors from the member countries.
Weekend Argus (Sunday Edition)
Posted at 07:42AM Feb 25, 2013 by Editor in Market |