Johannesburg - This year was an historic one for the South African auction
industry with an unprecedented number of advertised auctions, the
Alliance Group said on Monday.
"With record levels of distressed selling, the Fifa World Cup
around the corner, lower interest rates and a plunge in investment
and consumer spending, the year has seen an unprecedented number of
advertised auctions," CEO Rael Levitt said.
"In the last quarter, bidders began cramming back into the
country's auction rooms and this has sparked a mini-boom in the
industry."
Many property financiers and estate agencies were paralysed by a
lack of debt financing, the global downturn, poor buying sentiment
and South Africa's first recession in 17 years. However the auction
industry in 2009 still saw record numbers of transactions being
conducted throughout the country, Levitt said.
Alliance Group's auction analysis showed that more auctions were
conducted during 2009 than in the three preceding years.
"From an Alliance perspective, by the end of 2009 the nationwide
company brought almost 10 000 individual properties to the auction
floor.
"We literally sold more houses in 2009 than we did in our first
decade of existence," Levitt said.
Stress sales
He said the South African distressed housing market peaked in
the second quarter of the year but forced sales of single
residential homes dropped considerably in the third and fourth
quarter.
"The Alliance Group Distressed Asset Index, which tracks local
mortgage stress, reported that arrears on mortgage bonds increased
from 55 000 in the second quarter of 2008 to 140 000 in the second
quarter of 2009."
However, Levitt said the group had seen a marked drop in forced
auction sales in the third quarter.
"Lower interest rates and banks assisting defaulting debtors are
now having a positive impact."
Alliance found that mortgage stress had declined year-on-year by
40% in the last quarter, with strong buyer uptake at far
higher prices than the previous three quarters.
"During the year, liquidations of property developments and
investor schemes reached unprecedented levels with over R5 billion
worth of development real estate going into liquidation during
2009."
Levitt said several investor schemes had hit the wall in 2009
and groups such as the Genesis Property Group, City Capital, MDC
Property Group and King Financial Services had all been placed in
provisional liquidation leaving thousands of investors exposed.
"We will definitely see some commercial property hitting the
distressed auction floors next year but this market is
fundamentally sound and the properties will be snapped up by
predatory investors," he said.
Levitt believed that distress remained for large tracts of
vacant development land, incomplete developments and a few more
golf estate developments which were under severe pressure.
Although latest data on insolvencies and liquidations showed
that year-on-year growth was significantly negative, according to
figures just published, these reports took only the number and not
the value of debt delinquency among individuals and companies
into account, he said.
"One might interpret the improvement of insolvency as a
reflection of the benefits of lower interest rates, but the third
quarter of the year saw the highest value liquidations hitting the
country's Masters' Offices in years.
"Corporate liquidations in the last quarter of 2009 will flow
into high-value bankruptcy auctions in 2010," he said.
- Sapa