Fewer desperate sellers, but market on a knife-edge

Fewer desperate sellers, but market on a knife-edge

Fewer desperate sellers, but market on a knife-edge


With the relatively positive turn in the South African economy and the property market showing signs of recovery, it makes sense that fewer distressed properties are entering the market, as is being widely reported by agents handling these specialised sales.

For example, Mark Brickles of RE/MAX Ultra Select, which operates in the Cape Flats and south-eastern suburbs, including Grassy Park, Strandfontein, Mitchells Plain, Lotus River, Ottery and Lansdowne, says there has definitely been a slowdown in the number of distressed properties being offered for sale.

"In 2009, I would say at least half the properties we sold were in a distressed situation.

"Last year at least 40 percent of our sales were made up of distressed sellers, while so far this year that figure has dropped to about 20 percent of the sellers we deal with," Brickles said.

Peter Gilmour, chairman of RE/MAX of Southern Africa, who also heads up the group's specialised distressed property department, says that since January, the agency has listed about 600 distressed properties, of which 10 percent have been in the Western Cape, 20 percent in KwaZulu-Natal and 70 percent in Gauteng.

"Of the distressed properties listed in the Western Cape, 40 percent have been sold. These properties have spent on average 48 days on the market and range in price from R250 000 to R2 million. RE/MAX has sold the homes at 91 percent of the bank's asking price," says Gilmour.

RE/ MAX Ultra Select undertook a number of distressed sales in the middle of the recession and Brickles says banks were accepting offers as low as 50 percent of the value.

However, the banks are no longer accepting such low offers, which he says is a strong indication that a gradual recovery is taking place.

"The banks will look only at offers that are at least 80 percent of value. RE/MAX Ultra Select has sold 16 distressed properties since the beginning of the year and we have five on our books.

"The distressed property price band has not been at the really low end of the market, but rather more in the middle, with homes priced between R600 000 and R900 000.

"Previously, it was mostly lower-end homes that were sold as distressed properties."

Brickles says that distressed properties take between 30 and 60 days on average to sell - which is roughly the same period as normal listings - as they are priced at fair market value.

He believes that despite signs of a gradual recovery, the market remains on a knifeedge.

"It's as if people are just about coping with paying their bonds now, but don't really have money to upgrade in most cases or to spend money on luxury items," Brickles said.

"In my opinion, we will have a lot of people in trouble again, even if interest rates go up by as little as two percent or three percent."

Gilmour said: "Positive trends in the property market are by no means an indication that distressed properties are a thing of the past.

"We expect that distressed properties will continue to come on stream for the next five years at least, what with interest rate hikes on the horizon, along with other factors that will influence the ability of consumers to meet their monthly payment obligations."

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