Johannesburg - It's high season for debt collectors, auctioneers and other insolvency merchants as businesses fail and overindebted consumers stumble on their financial commitments, thanks to the tough economic cycle.
Repossessions, bankruptcies and liquidations have shot up markedly owing to expensive credit, costly fuel and food.
Auctioneers say the up-tick in the bank repossession market is evidence of the effect of recent interest rate increases kicking in.
They say slowing demand and abundant properties in possession have forced house prices down and caused vehicle values to shrink.
Talia Iacovou, a property broker at auctioneering house Aucor, says high end property values were down by as much as 20%.
"There is a deepening gloom over the property market," she says.
Homeowners defaulting
Alliance Group chief executive Rael Levitt says the number of households falling three months or more behind on mortgage payments is spiralling upwards.
He says research done by his company shows that an increasing number of homeowners are defaulting on home loan repayments, with an estimated 70 000 South Africans currently in mortgage arrears.
"The number of homeowners who have defaulted on monthly mortgage repayments by up to two months has increased tenfold in the 12 months to end-September 2008."
Absa Home Loans managing executive Luthando Vutula says the housing market has cooled off substantially on the back of rising interest rates between June 2006 and June this year.
"Economic activity has slowed down over a wide front and households remain under severe financial pressure.
"Factors such as surging inflation and significantly lower growth in real household disposable income have contributed to the housing market slowing down," he says.
Rates
The full effect of the rate hikes in the first half of 2008 are still working through to the economy and the housing market.
The rising interest rates have resulted in mortgage repayments rising by 35.6% in total over the past two years. These developments, together with the impact of the National Credit Act, are weighing on household finances and have caused the property market to experience relatively low levels of activity and price growth in recent times.
Vutula encourages existing and prospective homeowners experiencing financial difficulties as a result of the current economic cycle, to contact their banks to ascertain the various options available with regard to a mortgage loan.
He said Absa had launched a debt repair line to help customers who are experiencing debt affordability problems.
Marcel de Klerk, Absa managing executive for vehicle and asset finance, said this week's decision to keep interest rates unchanged would help stabilise the car trade, which is under severe pressure.
De Kerk says there is evidence that many in the middle classes are ditching their fuel-guzzling 4X4s for more energy-efficient cars.
He says there is an overstock of vehicles on the market and that repossessed vehicles are fetching up to 15% less on auctions and tenders.
"We are still repossessing about 1 350 vehicles a month but there are signs that the situation is stabilising," he said.
WesBank sales and marketing director Chris de Kock says while new car sales have declined by an average of 20% year on year on the backdrop of declining consumer demand, used car sales have remained marginally stronger.
- City Press