New real estate legislation and investment structures are changing the rules of the property game and investors and property owners would do well to take note of the shifting goal posts. So says Attie Pretorius, Director and Head of Cliffe Dekker Hofmeyr’s National Real Estate Practice.
The first ‘game changer’ relates to a by-law promulgated by the city of Cape Town which seeks to regulate the issue of dilapidated and often abandoned buildings that potentially pose health and safety risks to the general public.
Explains Pretorius: “The by-law prescribes the regular inspection of buildings, the serving of notices and warnings on landowners requesting, amongst other things, the repair or demolition of the dilapidated structure. Notably, the by-law authorises the local authority to take such steps to repair or demolish these structures at the owner's expense. Although owners may not be thrilled, the by-law is a welcome measure as far as urban regeneration is concerned and other provinces may soon be subjected to similar laws.”
Another important piece of legislation which is sending ripples through the real estate industry is the Rental Housing Bill which proposes to regulate the relationship between landlords, certain historically disadvantaged and/ or indigent tenants and Government.
“Chapter 4 of the Bill is particularly notable in that it proposes the establishment of Rental Housing Tribunals which would be responsible for resolving disputes between landlords and tenants. The tribunals would have the power to determine issues relating to overcrowding; unacceptable living conditions; lack of maintenance and exploitive rentals. Suffice to say, if enacted, the Bill will have far reaching consequences for landlords and tenants alike.”
In terms of real estate investment vehicles, Pretorius says a novel new structure, namely Real Estate Investment Trusts (REIT’s) are making investment in income-producing real estate more accessible to a more diversified range of investors, including institutional and retail investors.
According to Investopedia, the definition of a REIT is: “A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. This structure has become increasingly popular in foreign countries and will be a welcome addition to the South African property investment milieu,” Pretorius notes.
Commenting on the future of real estate in South Africa, Pretorius says he believes residential long-term leases will become more popular with government as they represent a viable alternative to land ownership in terms of providing housing to people who fall into lower income brackets.
