Leasehold a secure option for land

IF THERE is to be government regulation of foreign land ownership in SA, an option would be to look at 99-year leaseholds, says Cape Town-based international remortgaging firm Bond Busters.

Briton Richard Pembroke, joint MD of Bond Busters, which is part of the Cape & Country group, says a 99-year leasehold option for foreigners would not put off property investors from investing in SA. “In London, for example, hundreds of thousands of properties are bought by property investors on leasehold — and it’s their first property.”

He says SA will still attract foreign investment, but a distinction will be made between the rights of foreigners buying land and SA citizens buying land. As land is a “very sensitive issue” in SA, it is not unreasonable to make a distinction made between foreigners and locals.

Foreign land ownership has been a contentious issue in SA in recent years, with some commentators alleging that demand from foreigners for property has driven up property prices.

A panel appointed by Land Affairs Minister Thoko Didiza last month recommended a moratorium on foreign land ownership. This followed remarks made by President Thabo Mbeki that restrictions would be imposed on foreign property ownership, but they would be in line with international norms and practices.

Pembroke says there is no financial argument for restricting foreign land ownership. “There is no evidence that foreign investors are driving up property prices. The Johannesburg investor in Western Cape has every bit as much financial clout as an international investor, and these investors are purchasing property in places like the Western Cape at a far greater rate.”

The economic benefits of foreigners buying property in SA also far outweigh any potential financial disadvantage, he says.

But Pembroke believes there is an “argument of principle” that it is “disingenuous” for government to be trying to implement a challenging and important policy of land redistribution on the one hand, and on the other, allow “completely unregulated foreign-property acquisition”.

“On principle, I think it is important that a distinction is made, but the distinction should in no way put off or be seen as a barrier to foreign property investors. It is for this reason I feel the long-term leasehold is one of the ways to go.” However, no laws should be passed by government which would frighten the international investment community, he says. “That would just be disastrous.”

The national land affairs department says it will not comment on the issue until the cabinet has decided on the land panel’s report. The department, which referred Business Day for comment to legal academic Shadrack Gutto, who chaired the panel, says the panel’s report still has to be reviewed by cabinet.

Gutto says there is “no doubt” some form of regulation or other will be adopted by government. “At this stage, one can’t pre-empt what options will be preferred by government.”

He says the panel did comparative studies on other countries in its investigation.

One of the options considered was leasehold land. But, he says, the leasehold option must be carefully considered to see if it “will have a negative impact on land reform”. Although a leasehold system “works well in Britain, one cannot just cut and paste” the leasehold policy.

Gutto says there are creative ways to combine leaseholds with other options, so that foreigners can have security of tenure, but citizens can have some stake in a partnership. The challenge is how to create security of tenure for long and short-term foreign investors, and have land available for redistribution.

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