Expropriation Bill to force South African investors overseas?

Expropriation Bill to force South African investors overseas?

As the country’s banks raise concerns, will the passing of the bill force South African investors to stable international markets such as UK property?

Summary:

  • The Banking Association of South Africa has warned the government of the impact the passing of the Expropriation Bill will have on the country’s economy
  • Restricting property rights could increase the rate of borrowing and deter local and international investors from buying real estate
  • There’s already been a surge in South African’s purchasing property in the UK in 2015, buoyed by a stable currency and strong returns

What impact will the Expropriation Bill, currently before parliament, have on the South African property market?

The Banking Association of South Africa (Basa) has warned of the serious economic ramifications if current proposals are passed. The Bill will allow the government to expropriate property pinpointed as being ‘in the public interest’ but, in return, will pay compensation to property owners that’s deemed ‘just and equitable’ rather than calculated solely on a market-related basis.

Basa has raised concerns about the dilution of property rights and stated that financial institutions and property owners could suffer losses. The Bill could hike up mortgage costs, whilst also making lenders more resistant to providing loans to buyers. Consequently, this could deter local and international investors from entering the South African market.

“We are concerned that the Bill could have both economic ramifications for South Africa and systemic implications for financial institutions, as we are compelled in terms of local and international regulatory frameworks to use market value as the basis of determining security held in support of loans, mortgages and other forms of acceptable security,” Basa’s Pierre Venter declared.

In recent months there’s been a significant uplift in the number of South African investors purchasing UK property. With the pound traditionally viewed as a solid hedge against the rand, British property has a long track record of delivering strong investor returns in a stable economy, whilst it also offers the diverse range of products many South African’s seek when looking to invest overseas.

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