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The oversupply of golf estates has claimed another victim.
Johannesburg - The fortunes of South African homeowners have improved, according to auctioneer Alliance Group which reported a dramatic decline in mortgage arrears in the fourth quarter of 2009.
Latest data from auctioneer Alliance Group show that the number of households that are more than two months in arrears on mortgage repayments has dropped by a 61% over the past six months to 60 000 in fourth-quarter 2009. This is from a record high of 155 000 in second quarter.
CEO Rael Levitt told Fin24.com in an interview that there has also been a significant drop in distressed property sales on auction floors in recent months.
Levitt said that in first-half 2009, about 4 500 cash-strapped property owners were giving up homes every month through forced auction channels. By December 2009, forced sales had declined to about 2 500/month.
Levitt ascribed the decline in mortgage stress and forced sales to the positive impact of lower interest rates, banks' willingness to assist defaulting debtors, and an overall improvement in sentiment.
"Both consumers and the banks clearly started seeing the light at the end of the tunnel by the fourth quarter of last year," said Levitt.
Although volumes of distressed sales on auction floors had declined, sales prices increased in recent months on the back of a growing number of value chasers packing into auction rooms, said Levitt.
The increased appetite among private investors in particular rose so strongly in second-half 2009, that the weight of money coming through Alliance's auction rooms doubled in the six months to December 2009 year-on-year, he said.
Levitt said increased buyer appetite had supported a significant jump in property values in fourth-quarter 2009. That meant auction buyers were no longer getting the massive bargains of six months ago.
Levitt said that in first half of 2009, bidders could snap up distressed properties at a discount of up to 40% of the price typically paid in 2007/2008 at the height of the property boom. That discount has now narrowed to about 20%.
While Levitt expected distressed sales among individual homeowners to continue to decline throughout 2010, there are still plenty of developers who own large tracts of vacant development land and incomplete housing developments that are in trouble.
A few more struggling golf estates are also likely to hit the wall this year, said Levitt.
- Fin24.com