Is Land Expropriation Without Compensation a Threat for Residential Property?

There is much talk about land expropriation without compensation.  For property owners across South Africa, it’s not a topic that sits too well.  It is also a concern for those who are contemplating purchasing property.

I won’t debate the merits of land expropriation.  There will be strong arguments on both sides of the issue as to why or why not land should be expropriated without compensation.

The reality is that we have not really heard any definitive statements from the various politicians in positions of power that relate to residential property.  What we do know is that the ANC approved the policy of land expropriation without compensation with certain conditions – most significantly that this would not negatively impact the production of food, and that it would not have a negative impact on the economy.

That being the case, any move to expropriate residential property would have a disastrous impact on the economy.  Banks would stop providing home loans, and the entire property market would collapse.  That certainly isn’t what any government would be looking to do.

Any move to expropriate land that is bonded would also have to stand up to the Constitution.  How would it be possible to expropriate someone’s asset and leave them with a debt to service?  What of the bond-holders rights?  All the legal opinions I have heard have stated that the Constitutional Court would never allow this to happen as it infringes on many other of our constitutional rights.

Unfortunately, we have the not so small matter of a general election next year.  The current land expropriation talk is obviously aimed at securing votes in the upcoming election – and there is no doubt that those hoping to remain in power are playing a dangerous strategic game.

But the reality is that whoever is in power also wants a strong economy.  Simply expropriating residential land without compensation would collapse the economy to the point of no return.  It would be highly improbable, and almost impossible, for general residential property to be expropriated without compensation.

The same logic would apply to agricultural property – although there is no doubt that this is what the politicians are really targeting.

So what does this mean for the average property owner?  It means that land expropriation of general residential property is not a threat.  Were it to happen, the entire property market would collapse – and that’s not an option for anyone.  Banks will know this, and they will continue to offer home loans.

We’re in a market where there is excellent value on offer to discerning buyers.  This is a great time to acquire an asset that will offer great growth in the future.  As with all investments, research the area and the property well, and make informed decisions.  Think back to those who invested between 2008 – 2010 and saw outstanding returns when they sold in 2015-2016.  Once the election is behind us we can expect strong recovery – so now is the time to buy.

 

Steve Caradoc-Davies

Principal of Harcourts Platinum

 

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