Myths about foreign property buyers 'must be dispelled'

Category News

According to Lightstone data, only about 3 percent of property in South Africa is owned by foreigners and, at best, 2 percent of all annual purchases are by foreigners, so the reason for wanting to restrict ownership and who this is meant to benefit is difficult to gauge, says Seeff chairman, Samuel Seeff.

"It seems to just be that time of year again when the land debate regrettably turns to foreign property ownership and, rather than advance a solution to the land issue, it sends the wrong message to investors and puts undue pressure on the property market.

"It is also not foreign visitors, but mostly those who live here permanently that constitute the bulk of property buying. Consider also that as many foreigners sell their property each year, which possibly even takes foreign buying into negative territory in real terms."

According to Propstats, foreigners bought about 456 out of a total of 10 321 properties that were sold across the entire Cape metro last year. This is where the bulk of the actual non- resident buying takes place. Even across the richest and most expensive residential property strip favoured by foreigners, the Atlantic seaboard and City Bowl, only just over 10 percent of all sales last year were to foreigners, says Seeff.

"If you extrapolate this nationally, the picture remains similar. According to recent Lightstone data, only about 700 out of almost 24 000 monthly sales are to foreigners. Although some R9.7 billion worth of property was sold to foreigners, about R11.3bn in foreign- owned property was sold, leaving a negative net effect of R1.6bn.

"The myth that foreigners buy the most expensive property and pay exorbitant prices needs to be dispelled conclusively. Although the weak currency has made our real estate attractive, foreigners, l i ke every buyer out there, want to pay the lowest possible price. In fact, it is South Africans who understand the nuances and characteristics of the SA property market who are paying the highest prices."

He says the two highest prices ever paid for residential property were both sales to South Africans. A Capetonian paid R190 million for a Clifton apartment in 2013 and a Pretoria businessman paid R113m for a penthouse at the One&Only at the V&A Waterfront.

Of the 51 most expensive properties sold last year, only eight were sold to foreigners, mostly from the UK. The four highest prices were paid by South Africans - R70m for vacant land and R55.86m for a house in Clifton, R64.9m for a house in Fresnaye and R69m for a Bishopscourt property.

"Most of the foreign buyers are UK and northern European 'swallows' who travel south to escape the European winters. They stay for three to four months during our summer and often bring friends and family. They bring pound sterling and euros, shopping, eating out and visiting tourist attractions, all of which are vital job creators.

"Making foreign buyers feel unwelcome is likely to have a knock- on effect on tourism, especially in the Cape where it is a vital driver of the local economy.

"In any event, what constitutes a foreign buyer? Is it a permanent resident, someone who visits for up to six months or someone who just comes for a short stay? What about buyers from the rest of the SADCregion and African countries like Nigeria who have growing business interests in Johannesburg and are looking to buy homes in Sandton. Do we want to discourage this?"

Seeff says foreigners made to feel unwelcome, along with their friends and families, are likely to start looking elsewhere for their annual holidays and winter escapes. Tourism is vital for the economy and is the biggest multiplier of jobs.

"Most foreigners pay cash for their properties and can in any event only borrow up to 50 percent of the price. That is direct foreign investment. Then there is the residual i ncome t hat g ove r nment receives in the form of rates and taxes and basic utilities as well as jobs created for domestic and external service providers such as property, pool and garden maintenance.

"Foreigners also bring progress. The regeneration of the old rundown Cape wine farms and Cape Town's inner city development are two prime examples. All of this brings money into the economy and creates jobs.

"Finally, is preventing the sale of fixed property to foreigners correct constitutionally? Can you be prevented from selling your own property to a buyer of your choice? Will restriction not just encourage deviant behaviour and circumvention?"

Seeff believes that given that foreigners own a paltry 3 percent of property at best, the move to restrict ownership is not about retaining prime property for South Africans, as these are already owned by South Africans as alluded to - nor is it going to assist in the land redress.

"We would rather encourage the government to engage with industry experts before making statements that do little other than upset the market and create uncertainty. Especially considering that we are talking about 3 percent of property at best. If government feels strongly then yes, restrict the sale of government-owned land rather than interfere with the free market principles of wiling buyer and willing seller.

"Although countries such as Australia restrict foreign ownership, many others such as the UK, where about 15 percent of property is foreign owned, are open. Given the economic benefits of external investment, there seems to be no reason not to take the path of the latter. The converse is likely to have a negative effect on the market and could well harm the economy," says Seeff.

Author: IOL

Submitted 16 Feb 15 / Views 1955