Property for Sale - South Africa | Buy Property in South Africa

Property for sale in South Africa. A good investment? Or fraught with risk?

President Thabo Mbeki’s announcement that restrictions will be introduced on foreigner’s property ownership in 2006 has sparked fresh debate around the possible impact it may have on the South African economy, especially foreign investment.

Restrictions on foreigners’ land ownership differ markedly across countries .E.G Mexico and Chile don’t allow foreigners to buy property near their borders. Only foreigners living in Indonesia, and whose presence is seen as beneficial to national development, can own property there and they cannot own more than one property. Singapore has similar restrictions.

In Thailand, foreigners buying vacant land must invest $1m (excluding the purchase price) for a minimum of five years in Thai government-authorized investments (such as government bonds). In Switzerland, foreigners generally cannot buy more than one property; their ownership is restricted to tourist areas and large cities; and they are subject to higher legal and transfer costs. In Australia, foreigners buying vacant land have to begin construction within 12 months, and they cannot buy commercial property valued more than AU$50m.

In South Africa, a central motivation for considering restrictions on foreigners’ land ownership appears to stem from the concern that they may be pushing up domestic property prices, thereby making property less affordable to South Africans. This is particularly important in support of the land reform programme and the broader transformation process.

Foreigners may have had a bigger impact on property prices in select prime locations, such as popular tourist destinations. Therefore, insofar as there is a socio-political desire to keep coastal areas affordable and accessible to South Africans, constraints on foreigners’ purchases in these areas may be plausible.

Further, by only imposing restrictions in such areas, the South African authorities would substantially temper fears that they are unreceptive to foreign capital more generally and, indeed, property ownership would not be to the total exclusion of foreigners. However, this should be weighed against the additional administrative and regulatory burden of more complex legislation and oversight mechanisms.

The government’s generally business-friendly track record, however, does suggest a pragmatic approach may ultimately be adopted. Critically also, given the global prevalence of restrictions on foreign land ownership, the mere introduction of such rules in South Africa should not diminish the country’s relative attractiveness as an investment destination. The detail of the restrictions and the implementation process will be of immense importance, especially insofar as confidence in application of the rule of law and property rights is untainted.

“Caveat Emptor” Always consult a property professional and take sound legal advice.

Coming soon in 2007 property for sale in South Africa.