Foreign investors are not the villains

A booming economy and the growing spending power of an emerging black middle class are seen as among the key factors pushing property prices in SA.

A prevalent myth, according to some leading property analysts, is that the escalating cost of property can to a larger or lesser degree be attributed to the buying power of foreigners.

Against this backdrop, the office of Land and Agriculture Minister Thoko Didiza recently mooted plans to limit foreign property ownership in SA.

But Patrick O'Shea, CEO of Engel & Völkers Western Cape, an international real estate company, has urged government to reconsider such moves.

He says that government should explore the real facts of foreign property ownership in SA, which is not a contributing factor towards the country's spiralling property prices.

Instead, O'Shea says that incentives for property ownership that would make home ownership more accessible to all sectors of the South African population, should be examined.

Another fact to note, says O'Shea, is that foreign purchasers generally do not buy in the broad, widely affordable market pegged at under R1m.

"The sub-R1m real-estate market is in fact where the greatest stock shortages and highest levels of consumer demand are being experienced.

"This is a trend attributed to the rapid growth of the new South African middle class and not a function of foreign buyer activity," he says.

Engel & Völkers says that typical foreign buyer purchases range from R3m upwards.

Meanwhile, the property market in the East London area is also booming, reflecting an upward growth trend in which the Eastern Cape area is becoming increasingly attractive to property investors.

Etienne van Rensburg, principal for ASAP Properties, whose company is active in the main beachfront area of East London, says foreigners and Gauteng investors are quick to notice the investment opportunities.

One of the reasons being cited for East London's economic growth is its industrial development zone, which is now coming on stream.

Van Rensburg says that government employees living in the former Transkei and Ciskei are buying in East London, which is also increasing the demand for housing.

There is also speculation that the beachfront could be earmarked for tax incentives and relief as part of government's city centre rejuvenation programme.

"Over the past two years I have seen prices grow there at a far greater rate than in other suburbs in East London. I expect this trend to continue."

Van Rensburg says that on the beachfront, two-bedroomed apartments that were selling for R145000 1½ years ago are now selling for between R560000 to R870000 in the same block. Separate title units now sell for more than R1m.

"Six months ago, that was unheard off. We have just sold a three-bedroomed townhouse on the main beachfront for R600000 that was bought at the end of 2003 for R250000," he says.

Article by: Business Day