Mzansi Afrika

From Johannesburg South Africa, a window on the world

Thursday, August 26, 2004

Foreign property ownership in SA

Yesterday’s Business Day has an article on foreign land ownership in South Africa. The government has appointed a panel to investigate the issue. Concerns have been raised by our president and the ANC about the scale of foreign land ownership in the country. The panel will examine general patterns of land ownership and landlessness. The idea is to conduct a thorough investigation to provide information that will inform government policy making.

This is an issue which I find worrying – I’d like to buy a holiday house one day, and I’d hate to be priced out of the market because foreigners have been gobbling up the best land. It’s not that I have anything against foreigners, I’m speaking purely from an economic perspective. I hope I don’t sound like some crazy fascist pig because that’s not at all my intention. The second aspect that I find to be of concern is the environment. I don’t think enough attention is being paid to long term conservation or developments that are environmentally friendly. People are making money and that’s the bottom line.

Someone mentioned to me that Australia had a similar problem in the past, and had formulated policies to control foreign land ownership. I decided to go online to see what I could find out. The results were interesting - maybe South Africa would benefit by taking a leaf out of Australia’s book.

Firstly, I think its important to note:

The Government recognises community concerns about foreign ownership of Australian assets. One of the objectives of the Government’s foreign investment policy is to balance these concerns against the strong economic benefits to Australia that arise from foreign investment.

It’s one thing to talk about restricting foreign land ownership, but at the same time it’s important for South Africa to benefit from foreign investment in this sector. Can we have the best of both worlds? Let’s see what the Australians have done.

When it comes to the purchasing of already developed land:

Developed residential real estate means existing houses, flats or units. Acquisitions of developed residential real estate by foreign interests are not normally approved except (i) in the case of foreign companies buying for their senior executives resident in Australia for periods longer than 12 months, and (ii) foreign nationals temporarily resident in Australia for more than 12 months purchasing a residence for use as their principal place of residence while in Australia (and not for rental purposes), subject to the sale of the property when they cease to reside in Australia. This latter category includes long-stay retirees, and students 18 years of age and over studying courses of more than twelve months duration at recognised tertiary institutions.

When it concerns undeveloped property:

Acquisitions of residential real estate (including vacant building allotments) for development by foreign interests are normally approved subject to a specific condition requiring construction to commence within 12 months. Applications to acquire existing residences for redevelopment may be approved under this category provided that the proposal provides for substantial redevelopment expenditure in relation to the acquisition cost of the property and/or an increase in the housing stock. Once the development condition has been fulfilled, there is no restriction on the subsequent use of the property by the foreign investor, ie. it may be rented out, sold or retained for the foreign investor's own use.

The way I understand it, and I could be wrong, is that as a foreigner, unless certain conditions apply, you can’t buy an already existing house, but you can buy undeveloped land, build a house on it, and then sell or rent it – to Australians, or live in yourself – due to the first policy concerning developed property.

The Government seeks to ensure that foreign investment in residential real estate increases the supply of residences and is not speculative in nature. The Government’s foreign investment policy, therefore, seeks to channel foreign investment in the housing sector into activity that directly increases the supply of new housing (ie, new developments - house and land, home units, townhouses, etc) and brings benefits to the local building industry and their suppliers.

The effect of the more restrictive policy measures on developed residential real estate is twofold. First, it helps reduce the possibility of excess demand building up in the existing housing market and secondly, it aims to encourage the supply of new dwellings, many of which would become available to Australian residents, either for purchase or rent. The cumulative effect should therefore be to maintain greater stability of house prices and the affordability of housing for the benefit of Australian residents.


The Australians have been pretty much successful in trying to control property prices and speculation, while still managing to encourage foreign property investment in a way that has been beneficial to workers and the local building industry. The situation is far more complex than the scope of this entry, I haven’t covered commercial property, large scale investment, or full conditionality – yet I think, or hope, that I have focused on some of the issues that may be relevant to the South African situation. If you’re interested in delving further, the links are here and here.

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