Caution urged on restricting foreign property ownership

To salve the ire of a relatively small, but highly vocal, number of critics for the sake of damaging the country’s strengthening foreign investment image and particularly the good achieved by the recent budget has been lamented by a leading real estate personality.

In fact Jan le Roux, convenor of the PA Group, believes damage may already have been done to the country’s gathering image of political and economic stability even by discussing the possibility of placing a restriction on foreign ownership of local property.

In an interview this week Le Roux, who was responding to President’s Mbeki’s reference to placing some imposition on foreign property ownership in his state of the nation address, urged state restraint until the situation was thoroughly balanced against its negative implications.

Balance, in terms of the total numbers of rand and unitary value of homes that had already passed into foreign ownership had to be measured against their foreign currency input and job creation, both direct and indirect, within local communities. It was also vital to establish if their activity was directly inflating local property, especially coastal, which he seriously doubted.

Le Roux said this view was centred largely on price surges in the Atlantic Seaboard, but coastal areas, such as those in KwaZulu-Natal that had been ignored by foreigners had recorded even higher percentage rises.

Property economist Erwin Rode branded such a move as tantamount to the Government shooting itself in the foot. “It sends the message out that we’ll tolerate you, but you’re not really welcome here.” The logic advanced by protagonists of the restriction by claiming that it works in countries such as Switzerland is also denounced by Rode who points out that South Africa’s dependence on foreign capital and skills inflows are far more important than that landlocked European country.

Rode is “100 percent against” any imposition on foreign ownership of local property, and like le Roux, urges government caution on the issue with careful consideration be given its long-term implications.

Of similar view is Herman van Rooyn, economist and principal of Chas Everitt International franchise in Somerset and the Strand, but the prominent principal does concede there could be some merit if there is a need to allay concerns, if it was applied only to the super luxury end of the market, such as those properties above the R10-million mark. But, like the others, his views carry the cautionary over-rider of the knock on effects on job creation. 

Somerset West, traditionally a highly popular area for German buyers – from Germany and also Namibia – experienced a slowdown in this purchasing source last year driven mainly by the surge in the rend value exchange rate to the euro. However, van Rooyn says German buyers have now accepted the adjustment from R12 to R8 to the euro and the trend has normalised.

Brendan Miller, franchisee of four Cluttons offices in the Western Cape, also denies that foreign purchasing inflates prices. “It might have some time ago in Camps Bay, but foreigners have long wisened to local prices.” This is most apparent in their questioning of local selling commissions versus those in their home countries.”

Any government imposed foreign restriction he says would have a negative effect on the market in the high activity areas of the Atlantic Seaboard and West Coast, where they have been active in new developments. He would foresee a market slowdown and price stabilisation until the market recovered from its removal of this source, which he conceded could take some time.
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