Future foreign investments in South African property may be in danger after advisers to the nation's government recommended it suspend sales of land to foreigners until a system has been developed to regulate the process.
The country, which has become an increasingly popular destination for Irish property developers over the past few years, has seen phenomenal growth in its property market, and industry sources suggest the government may be looking to keep these gains within the country.
Agriculture minister Thoko Didiza said he would study the recommendations made by the panel of experts and then pass them onto the cabinet.
However, while the memo said the measure should apply to all land purchases, including residential properties in urban areas as well as on arable soil, some observers believe that president Thabo Mbeki, who is keen to attract foreign investment into the country, will be unlikely to do anything too radical.
A spokeswoman for Howard Holdings, an Irish property group that has a large development in Cape Town, said that until the recommendation became law it would have no effect on the group's development.
She also pointed out that, as recently as November, the South African government had introduced legislation to encourage investments in certain types of property, so it would be surprising if it now reversed its stance.
As in Ireland, low interest rates have encouraged increased demand for property in South Africa and in turn have pushed up prices of residential property.
In 2003, the latest period for which figures could be obtained, the average price of a property increased by 23 per cent. This compares with growth of 9.3 per cent in Ireland last year.
Some observers have expressed concerns that foreign investment in the property market is pricing locals out of the market, but others argue that increased foreign investment is a sign of confidence in the country, something lawmakers are keen to generate.
Industry sources estimate that South Africa is in the top 10 destinations for Irish property investors.
"With a direct air link between Dublin and Cape Town the area is becoming increasingly popular with Irish investors," said Ronan O'Driscoll, director of new homes at property consultants Hamilton Osborne King. "It has had one of the highest levels of capital growth in the last two years, prompted by investors and non-South African purchasers."
Still, the Irish interest in South Africa lags behind that of other parts of Europe. Spain is the top Irish location for second homes, while Bulgaria and other parts of eastern Europe are becoming increasingly popular.
Another Irish group, MountBrook Homes, owned by property entrepreneur Sean Dunne, has a new development in Cape Town, Lagoon Beach. No one from the company was available to comment on the effect legislative changes would have on the development.
