Pretoria - Home buying by foreigners increased in the first quarter of this year compared to the previous quarter, despite the ongoing debate in the government about land reform, scrapping the “willing buyer, willing seller” principle and the expropriation of land without compensation.
The increase in foreign home buying also occurred despite South African property purchases by foreigners becoming more expensive because of the strengthening in the value of the rand.
FNB said the estimated percentage of home buyers believed to be foreigners rose slightly to 4.89 percent of total home buyers in the first quarter of this year from 4.45 percent in the fourth quarter of last year and 4.67 percent in the first quarter of last year.
John Loos, a household and property strategist at FNB, said the increase in foreign buyers was “not meaningful” because this estimate could be volatile from quarter to quarter.
FNB said the estimated percentage of foreign home buyers for the four quarters up to the first quarter of this year rose to 5.23 percent from 4.75 percent for the four quarters up to the first quarter of last year.
FNB’s foreign home buyer confidence index also rose in the first quarter of this year compared to the previous quarter. Loos said this was “interesting” because the significant strengthening in the value of the rand last year into early this year had made South African homes significantly more expensive to foreigners in their own currency.
In rand terms, average house price inflation by February this year was virtually non existent at 0.8 percent year-on-year. However, Loos said when converting the FNB house price index into foreign currencies, the index rose last month year-on-year by 24.3 percent in euros, 19.3 percent in US dollars and 36.5 percent in UK pounds.
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“This means that South African property has become significantly more expensive for many foreign buyers,” he said.
However, Loos said foreign home buyer confidence was perhaps less about cost and more about sentiment. While sentiment towards South Africa was not very positive at present, the strengthening in the rand since its Nenegate shock in late-2015 in part reflected some improvement in investor sentiment towards South Africa off a low base.
“It could be this mild improvement that is not only being reflected in the rand but also in the housing market in terms of a small strengthening in foreigner demand. However, the quarterly move in estate agent’s estimates was small,” he said.
Nenegate refers to the replacement by President Jacob Zuma of finance minister Nhlanhla Nene with little known back bencher Des van Rooyen, who was replaced days later by former finance minister Pravin Gordhan.
Zuma said at the opening of the National House of Traditional Leaders this month that the government had identified the weaknesses in the land restitution and redistribution programme. “The willing buyer, willing seller principle did not work effectively. It made the State a price taker in an unfair process. In addition, there are too many laws dealing with land reform which causes confusion and delays,” he said.
Zuma said to attain the goal of radical socio economic transformation in relation to land reform, the government must first undertake a pre-colonial audit of land ownership, use and occupation patterns and thereafter develop a single law “to address the issue of land restitution without compensation”.