Many people are up in arms over the proposed ban on foreign land ownership. But will it really have that big an effect on the local property market?
Much has been made of President Jacob Zuma's announcement that the ANC will be banning the sale of land to foreign nationals, but by the looks of things, the decision to only allow foreigners to lease property isn't going to have that much impact on the South African property market.
As things stand, roughly three percent of all property in this country is owned by foreigners and, according to Samuel Seeff, chairman of Seeff Properties, only two percent of all annual purchases are concluded by foreign nationals.
South Africans appear to have an entrenched belief that foreign investors are champing at the bit to lay their hands on exclusive real estate in this country which, given the weaker rand, is perhaps perfectly understandable. However, it must be remembered that the tip of Africa is a long-haul flight from both Europe and America and the costs and the time involved in taking the family on holiday to South Africa can be daunting.
To put things into perspective, Seeff notes that foreigners - both those who reside here and those who own offshore holiday homes - bought approximately 456 out of a total of 10 321 properties sold across the entire Cape metro last year.
Top prices paid by South Africans
While we often assume that the more expensive properties on the Atlantic Seaboard and City Bowl are snapped up by those with pounds or dollars, this isn't strictly true. In fact, the two highest prices ever achieved for residential property were paid by South Africans. A Capetonian paid R190-million for a Clifton apartment in 2013 while a Pretoria businessman paid R113-million for a penthouse at the One&Only at the V&A Waterfront. Likewise, of the 51 most expensive properties sold last year, only eight were sold to foreigners. Like the preceding years, the top prices were paid by South Africans.
Although the number of foreign property owners in this country may be a lot lower than the average man in the street believes, it needs to be remembered that many of those who do own property here are so-called UK and northern European 'swallows'. In other words they 'migrate' to our shores during the harsh European winters, stay for three or four months and return home. Seeff says the fact that these people bring Pound Sterling and Euros with which to shop, eat out and visit tourist attractions is vital for job creation and making foreign buyers feel unwelcome is likely to have a knock-on effect on tourism, particularly in the Cape where it is a major driver to the economy.
Confusion over ban
Unfortunately, although President Zuma's State of the Nation Address appeared to spell out the issue of foreign land ownership quite clearly, recent statements by others have clouded the issue. A recent SABC report quoted Gugile Nkwinti, the minister for Rural Development and Land Reform as saying the ban applied only to those buying farms and not residential property. Tourism Minister Derek Hanekom on the other hand has been quoted as saying that Cabinet has still to decide whether the ban will apply to all categories of land.
At this stage, government is sending out mixed messages and needs to clarify its position on the very important issue of foreign property ownership as quickly as possible.