Some South Africans are concerned that expropriation without compensation is a threat to residential property, but are these concerns valid?
Landowners, particularly those in the agricultural sector, are understandably nervous about Cyril Ramaphosa’s comments regarding land expropriation. However, in his maiden speech delivered shortly after his election as the head of the ANC, he emphasised that while the party was resolute in its decision to forge ahead with expropriation of land without compensation, the manner in which it was carried out should not harm the economy, agricultural production or food security.
While there may not have been talk yet of expropriating residential property, there are those who believe there is a danger that expropriation may not be limited to agricultural property and many have taken to social media to advise against buying residential property.
But just how real is this threat, and is there a chance that property in this sector too could be targeted by the ruling party? More importantly, should we start selling our homes and offloading investment properties before we are forced out with no recompense? The short answer is no, to both questions.
Mark Millner from Alan Levy Attorneys, who recently presented a talk on the topic, says: “While there are a lot of people who have become paranoid about the expropriation bill, it needs to be remembered that there is nothing new about expropriation of land in South Africa - the Expropriation of Land Act existed as early as 1976. Interestingly, a number of legal authors have noted that the Bill in its current form is far less draconian than the original 1976 Bill.
“In my view, these levels of paranoia are not necessarily justified, mainly because the new Bill provides far more rights and far more considerations than its predecessor ever did. The mechanisms that are in place (including the Constitutional Court) and which have always protected landowners are going to continue to function. However, from another perspective, it needs to be noted that the redistribution of land to address historical inequalities is necessary, and has to be applied.
What also needs to be remembered is that the government cannot simply state that it’s going to expropriate land; there is a process to be followed and anyone who is affected by the decision has the right to be compensated for the loss of the property.
What also needs to be remembered is that the government cannot simply state that it’s going to expropriate land; there is a process to be followed and anyone who is affected by the decision has the right to be compensated for the loss of the property.
“This, in my opinion, is going to have an effect on what sort of property will be expropriated. For example, let’s say the expropriation committee decides it’s going to expropriate an entire suburb. Firstly, anything that is done cannot prejudice the bond holder (the banks). This is clearly illustrated by the way courts which have dealt with evictions in the past have taken cognisance that mortgages have to be respected. This is because in order for an economy to function, money has to be advanced. It stands to reason that if the government decided to expropriate properties where bonds were in place, the banks would stop granting bonds because there would be no guarantee of a return on investment. If the banks left the property market, there would be no property market.
“Secondly, it’s vital to remember that homeowners have rights which are protected by the courts. The expropriation bill is clear on this, stating that everyone - including the bond holder - needs to be taken into account. In other words, a decision by the expropriation committee isn’t necessarily something that will be cast in stone and it’s virtually guaranteed that the courts would be inundated with cases should the government try to bulldoze any expropriation decision through.”
It appears that real estate heads agree that the expropriation of land won’t extend to residential property.
Simon Bray, Private Property CEO
"All indications so far are that the proposed policy only applies to agricultural land and not residential property.
The issue of land is clearly an emotive one and it is imperative that historical imbalances be righted but it cannot be done recklessly."
"I think the new president understands this and is keen to do this the “right’ way. He will seek consensus on the issue and will do things within the prescripts of the law. With his business background, he will recognise that it cannot be done in a way that harms the economy or South Africans’ rights to private property ownership."
Lew Geffen, chairman of Lew Geffen Sotheby's International Realty, says at this stage there is absolutely no foundation for speculation that legislation surrounding residential property will change in line with the proposed amendments to the laws governing the purchase and sale of agricultural land.
"I believe we've turned an important corner in South Africa. I'm positive that Cyril Ramaphosa will do everything possible to regain investor confidence, both domestic and international, and that he will put mechanisms in place to drive this process. In that framework, arbitrary expropriation of residential property would not make sense.
"Going forward under Ramaphosa's direction we should see more organised messaging from the government and platforms created to promote economic growth rather than engendering fear-mongering; a path from which this country should veer once political leadership stabilises."
Berry Everitt, CEO of the Chas Everitt International property group says:
“The possibility of land expropriation without compensation is of course a matter of interest to all property owners and buyers in SA as well as foreign investors, and the issue has come to the fore again because it was narrowly adopted as a party policy at the ANC elective conference in December.
However, we have no reason to believe that this policy is intended to include residential property - or that it will have any effect on residential demand or prices in the future.
Indeed, Cyril Ramaphosa has now stated several times that expropriation will only be supported when it poses no threat to agricultural production, food security or the financial institutions that support farmers – a clear indication that it is farmland that is under discussion. Such land, according to the ANC’s own Land Audit report, accounts for most of SA’s total land surface, with the towns and cities that are mostly made up of residential properties accounting for just 2,6%.
“Meanwhile, it is important to note that before expropriation without compensation could even be considered as a national rather than a party policy, it would be necessary to change the Constitution (Section 25) as well as the Land Restitution Act – and there are currently no proposed amendments to either piece of legislation, or even draft amendments, on the table.”
Chris Tyson, managing director of Tyson Properties:
“We have a very strong constitution in South Africa that protects the right of the property owner. Over and above this we have a very good Deeds Office that administers property transactions. South Africa has some of the best laws in the world when it comes to property.
“There is more chance of being defrauded in a property transaction than the government taking the property away.”
Richard Gray, CEO Harcourts South Africa says: “Underlying political commentary and negative sentiment undoubtedly influence investor confidence. However, the broader economic pillars of South Africa have a strong foundation and our GDP is diverse, therefore solidifying broader economic engagement. South Africa's political climate has started off positively during early 2018 and I think we have a lot to be hopeful for.”
