Inflation is spiralling out of control but nowhere near the housing market in Cape Town, especially the Atlantic Seaboard and to make matters worse salaries, are not adjusting proportionately.
Buying a flat or house as a first time buyer in Cape Town anywhere near the City CBD or Atlantic Seaboard is almost impossible for anyone, let alone upgrading from a one bedroom to a two bedroom, unless your dad happens to be Christo Wiese, has R80 billion and is keen to wire R90 million to an auctioneer on your behalf. Take nothing away from Clare Wiese, she is successful in her own right with a phenomenal eye for style, but this isn't New York City and no jewellery line can demand profits that afford a Nettleton Road home.
To make matters more ludicrous, Wiese thinks it was a bargain price and the developer Stuart Chait, the veteran property expert, agrees. Chait claims that Sasfin Bank ordered the auction, contrary to his advice. Chait's prediction was, simply by holding onto the property for several more months, letting foreign visitors view the property could have fetched a value closer to 150 million and during that waiting period, rent out the house for R150,000 per day. That statement contradicts a lot of estate agents claiming foreigners have little to no influence on property prices.
Samuel Seeff claims that less than 10% of property is purchased by foreigners in Cape Town and their investment plays no part in price. I disagree. What does 10% actually mean in value and number of transactions? It's hard to trust estate agents, they are constantly wearing two hats. They are inclined to issue market data but at the same time need to be cautious as to what they say and how they say it, as it directly affects their business as they earn a percentage of the sale price and anything driving down the price or slowing sales hurts their industry.
If we were able to replicate Vancouver's taxation concept, it would be a new way to collect much needed funding without directly hurting South African citizens.
The Clare Wiese example is one of the rare exceptions, which is why so much media attention has been drawn to the auction sale that fetched the highest price so far of R90 million. Auctions for high-end properties, unless it's a commercial property or homes in Australia, is not a smart move if you're after the big bucks because auctions are considered a place of desperate sellers. Foreigners would also need to bid by phone, and ever since Rael Levitt from Auction Alliance was found guilty of bid rigging using a ghost caller to scam Wendy Appelbaum in the Quoin Rock wine estate transaction, a lot of auctioneer companies try stay away from it.
Dogon Group, currently holds the record for the most expensive house ever sold in South Africa. The buyers were German, the area was Bantry Bay, Cape Town and the value was R290 million.
Vancouver Canada has been experiencing the same property issues as Cape Town but side-by-side, our property market has moved north quicker and is a lot further out of reach to our middle class and employees in the area. Vancouver also has a shortage of rental properties on the market due to foreign buyers buying for capital growth and shadow flipping and so, in an attempt to address the high property prices and foreign owned homes that stand empty, taxations were implemented. Foreigners buying property in Vancouver pay an additional property transfer tax of 15%. A house selling for R40 million to a foreign national would amount to an additional R6 million payable on transfer to the government.
If we were able to replicate this taxation concept, it would be a new way to collect much needed funding without directly hurting South African citizens. The money from the additional tax could be ring-fenced to fund low cost housing, housing relocation programs and the homeless. Foreigners might not feel so hard done by if they knew it was directly benefiting the locals.
Although these measures are intended to allow for home ownership to remain within range of the middle class, simultaneously collecting tax, it might also address the growing anger towards foreigners buying property.
The only potential problem with this idea is sticking to its created intention. Our government and other political parties have a history of meddling with things that make money and work perfectly, here's hoping that this is an exceptions.