Land and Agriculture Minister Thoko Didiza plans to start talks on limiting foreign property ownership in the country to put the brakes on escalating prices and make home ownership affordable for South Africans.

Didiza's spokesperson Nana Zenani said on Monday the government had decided to open dialogue on the issue.

"We need to look at the affordability of land because South Africans can't compete with foreigners and their dollars, who want to buy property in the coastal and other areas, because of the exchange rate. We need to ease the pressure," Zenani said.

An option under consideration was to convert foreign-owned title deeds to 99-year leases.

'South Africans can't compete with foreigners and their dollars'

Zenani could not confirm whether the step, if adopted, would be implemented retrospectively.

"We have not got to the discussions, so for now it is just a consideration (of the idea). Other options will come out of the discussions," Zenani said.

The department of agriculture and land affairs is researching foreign property ownership to establish how much land is in foreign hands.

Property developers, estate agents, farmers' unions and other government departments would be invited to the dialogue, which would start before the end of the year.

However, economists and estate agents have argued that foreign buyers have no effect on the middle and lower ends of the market.

'That market is being fed by local people with real incomes'

Rather, it was the influx of upwardly mobile black South Africans pushing up the demand for and prices of property, they said.

There were no fears of a Zimbabwe-style land grab.

Tradek economist Mike Schussler said any move to limit foreign ownership would stifle foreign direct investment and force foreign buyers to go underground using front companies and nominees.

"I don't think foreigners will want 99-year leases. Foreigners should be able to buy land."

"If we want overseas investment we need to be as investment friendly as possible."

"South Africans are also making a profit selling property at a high price to foreigners and that is money that will stay in the economy for a while."

"Poor people are unlikely to be looking to buy property in areas foreigners are going to buy in."

"The government does a lot of things right, but this doesn't make sense," he said.

Schussler said the government needed rather to look at ways of unlocking untapped capital in townships, where banks were still reluctant to lend because it was not easy to evict defaulting debtors.

"It would unlock a lot of our middle-class wealth and we would see a lot more upward mobility than black economic empowerment has given us. It should remain an open market, foreigners should be allowed to buy in and people's property rights should be protected," he said.

Brent Townes, CEO of Sotheby's International Realty, which deals largely with foreign cash buyers, estimated that foreigners owned at most eight percent of local property.

"We do not have foreigners buying in the R250 000 to R500 000 end of the market and that is where the demand is and where there is a shortage of stock. That market is being fed by local people with real incomes," Townes said.

"Foreign people buy in specific pockets ... They are not significant purchasers of properties up to the R1-million mark. How can such a small percentage have such a big swing in the market?"

"The property market is growing because of the economy and jobs. There are real forces at play. The foreign market is not distorting prices, the price inflation must and will continue," he said.