Foreign buyers and land ownership

(by Dr Andrew Golding, Chief Executive of the Pam Golding Property group)

Foreign buyers of prime residential property have made a welcome return to the South African market. Lured by attractive homes at equally attractive prices, relative political stability, wonderful climate and a currency which is very much in their favour, these buyers hail from across the globe. Europeans are prominent, but buyers from African countries – East, Central and West - are growing in numbers.

Recently this market, which had dwindled during the world recession, has revived. Over the past 12 months or so the purchase value of South African property bought by foreigners totalled R9.7 billion. Of these, 53 percent were cash sales and 47 percent bonded (foreigners may borrow up to a maximum of 50 percent). Of 280 395 registrations between 2013 and 2014, tracked by property analysts Lightstone, 8 530 were to foreign buyers.

This is an important number in terms of this country’s need of foreign direct investment and this inflow is often shrugged off by detractors of foreign property ownership. Yet the government report in 2007 by the Panel of Experts on the Development of Policy regarding Land Ownership by Foreigners in South Africa, noted that the UK has no restrictions on foreign ownership, commenting that such ownership “is in fact encouraged in order to attract direct foreign investment.” 

What appears frequently to be ignored is the fact that the buying and selling of residential property is a two-way street which applies to all involved, whether they be foreigners or locals. As an example, over the period mentioned above, during which foreigners bought properties worth R9.7 billion, foreign owners were net sellers in the market. These sales totalled R11.3 billion.

There appears to be a similar lack of understanding of the term land when the issue is reform, redistribution, dominant white ownership, or foreign buyers. Are we talking about basic land itself or developed land? Developed to what extent? Farms, factories, office blocks, apartments, houses, private clinics, old age homes, private estates? Should we be saying to foreign investors “Do come in and build a nice aluminium plant but don’t think of buying yourself a house?”

The foreign ownership bogey appears to derive from the wide misconception that, due to the exceptional buying opportunities in our residential property market, non-South Africans are buying up all our best homes in the choicest spots. Nothing could be further from the truth.

Current statistics – not based on surveys but on Deeds Office records - show that foreigners own some three percent of total land property in South Africa. In the UK the statistic is 15 percent.

Government does have a problem with land redistribution. Its efforts to buy (mainly rural) properties on the “willing seller, willing buyer” basis have waned – due partly to lack of funds, and of a lack of “willing” sellers. As a result, the government’s land reform programme, by which it hoped to transfer a third of all farmland to black hands by the end of this year, has failed.

The deadline for land claims has expired, but the government believes that some 400 000 land claims could still be lodged and President Zuma has signed into law the Restitution of Land Rights Amendment Act which opens a five-year window for the lodgement of further land claims. The government also wants to legislate to enable the expropriation of land without compensation if it has been acquired illegally or is used for illegal purposes. Neglected urban land may also come into the arena. As such, these laws will come with some slippery definitions. One man’s abandoned land, for instance, could be another’s fynbos paradise.

Minister for Rural Development and Land Reform Gugile Nkwinti has come up with a compromise plan to speed up rural redistribution – to introduce a leasehold option, with a minimum lease of 30 years. Singapore has a similar leasehold policy applicable to land for industrial purposes. It also has restrictions on land size which can be bought by foreigners.

Land reform issues obviously are not exclusive to South Africa. The 2007 Report noted that Chile is concerned about vast land tracts owned by foreigners and is taking measures to adjust this. In Indonesia, the 2007 Report noted, foreigners may not own freehold properties.

The recent “Yes or No” Freedom Referendum in Scotland re-opened many old sores on the issue of land ownership.  Until 2000 the country’s land tenure laws were feudal. Eight centuries after the reign of King Robert the Bruce, of Scotland’s total land acreage of 19.5 million, just over 10 million acres belong to 1550 private landowners and estates.

Research by Andy Wightman, land rights campaigner and author of The Poor Had No Lawyers , claims that 432 people own 50 percent of rural Scotland.

The surge of nationalism in Scotland, which has grown since the Referendum, has forced the government to introduce new or proposed legislation, such as giving communities an extension of the Right to Buy (practically all land), whether the owner wants to sell or not; a Land and Building Transactions Tax, which will target the top end; an upper limit to the amount any one owner can hold; changes to the law of succession and a whole range of measures to ensure that one million acres of land are in community ownership by 2020.

For some time now, Scotland has been a frontline favourite of foreign property buyers, particularly the ultra-wealthy seeking hunting, fishing and shooting estates in the Highlands. But this year potential buyers recognised that the possibility of a new, self-governing Scotland came with political risk. . Buying went into limbo.

The reaction to the possibility of widespread change illustrates how delicate and vulnerable the real estate market can be on the issue of property rights. We in South Africa should take note. There is little doubt that in terms of land restitution wrongs must be righted and the dispossessed compensated. But alarmist statements can do more harm than good.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 19 Mar 2018
      If a landlord opts to use a managing agent for the rental of his or her property, the inspection process can be easier as the agent is not emotionally involved and will certainly have concluded an in-depth inspection report in the interests of all parties.
    • 19 Mar 2018
      We all wish we could have the cheat sheet for selling a property – a simple Ctrl+Shift+C code that will magically secure an offer on your home in an instant. Though it is not possible to provide you with this cheat code (sadly, reality does not come with such perks), it is possible to provide you with a list of the most common blunders some of your neighbours have committed in their efforts to sell their homes
    • 19 Mar 2018
      Although property technology is now widely accepted as an established trend, especially in the international real estate arena, the industry has been cautious to advance and smaller markets like South Africa are still hesitantly dipping their toes in the water.
    • 16 Mar 2018
      Strange as it may seem, there is a stock shortage looming now in the luxury sector of the Johannesburg property market, because astute buyers have for the past few months been hurrying to snap up high-end homes being offered at excellent prices.
    • 16 Mar 2018
      No one likes having to claim but having insurance for your household contents is vital, and at the start of a new financial year, homeowners either applying for new household insurance or revising their existing insurance should take a comprehensive inventory of their possessions and keep track of the total value.
    • 15 Mar 2018
      First-time buyers typically need to save for at least three years to afford the deposit on a home, and the VAT and fuel price increases announced in this year’s budget are going to make it even more difficult for them to reach that goal.
    • 15 Mar 2018
      Sea Point shows how developers use these organisations to advance their own interests
    • 15 Mar 2018
      As the rand strengthens against other major currencies, the prospect of investing in properties abroad is an increasingly appealing option for South African investors. Several factors, local and international, are sending a clear message: now is the time.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us