CAPE TOWN (August 03) The argument that foreign buyers push up the average prices of South African residential land remains totally unproven, according to Tony Clarke, managing director of Cape Town-based Rawson Properties.
Commenting on the ongoing debate this week Clarke believes ownership of property should continue to be open to all foreigners and especially those investing in other spheres of the economy. Arguments advanced so far to limit such ownership he believes are largely invalid.
“Consider the facts.” Firstly, foreigners have in the last six years been responsible for less than 1% of the value of SA residential purchases – how can so small a figure affect the overall price?
“Secondly, foreigners buy mainly at the top end of the market so have little or no effect on middle and lower bracket prices.
“Thirdly, our experience has been that these foreign buyers negotiate as hard, if not harder, than locals and refuse to overpay. Fourth, foreign buying has slowed down after the record figures recorded during the 2004/2005 summer season. This is probably due to a stronger rand and South Africa’s property price growth that took place over that period.”
Clarke’s statements were supported by the Rawson research team, which notes that the average price of homes sold to non-South Africans in 2005 was R2 million. In 2006 it was R2,5 million and in 2007, so far, it has been R2,7 million. “In other words all in the top bracket.
Clarke said that in courting foreign capital investment SA businessmen have always been able to play the free enterprise card strongly, to sell South Africa on the basis that it is a society that respects the freedom of the individual and allows businesses the opportunities to grow.
“To restrict foreign ownership would send out the wrong message to the people we want to attract,“ said Clarke. “Foreign property transactions also boost the economy during the buying and selling process, as various taxes become payable, i.e. Capital Gains Tax and Transfer Duty.
The boom in property prices, he added, was due to factors already widely publicised such as the growth of the middle class, fairly low interest rates and a drastic shortage of land zoned for new development, coupled to rising construction costs.
“If the state wants lower house prices,” he says, “they must widen the urban fringe and zone far more land for residential use. The shortage of suitable land is a large contributor to raising property prices.”