The number of distressed properties coming onto the market has stabilised, and this is a good sign that consumers are managing their debt situations better and are planning ahead for tough financial times.
Goslett says locally, the average price of a distressed property is sitting at just over R1 million, with 70% of the properties based in Gauteng.This is according to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who says this sentiment is supported by the TransUnion SA Consumer Credit Index for Q1 2015, which indicates that consumer credit health improved in the 1st quarter at its fastest pace since 2011.
The index also states that household cash flow continued to improve in the first quarter on the back of a sharp decline in non-discretionary consumer inflation, which has helped household budgets.
Goslett says even though there has been some improvement in consumer money management, the estimated national household bank debt as a percentage of disposable income is at 77.3%, which is a high number. Added to this, there will be continued pressure on household income with fuel increases, electricity tariff increases and the increasing cost of groceries.
“The TransUnion SA Consumer Credit Index also points out that inflation is expected to rise again in the second quarter, which will mitigate some of the positive effects of lower prices on household real incomes in the first quarter.”
He says when it comes to property, there is no doubt that the housing market has been up and down during the last decade, going from boom to bust and slowly recovering again.
“Even though things are looking up after a few tough years, distressed properties will remain a reality in the property landscape for the foreseeable future, as some homeowners will undoubtedly find themselves unable to cover the cost of homeownership.”
Goslett says even though distressed property inventory in the US has been steadily declining in recent years, accounting for just 10% of existing home sales in March this year, down 4% from March last year, according to the National Association of Realtors, distressed properties in the US will not disappear completely. He expects the same trend to reflect in the South African market.
Locally, the average price of a distressed property is sitting at just over R1 million, with 70% of the properties based in Gauteng, followed by 10% in the Eastern Cape and 10% in the Western Cape, 5% in KwaZulu-Natal, with the Northern Cape, Free State, Limpopo and Mpumalanga accounting for just 5% combined.
“Distressed homes within our assisted sales department currently take on average 60 days to process, bearing in mind that distressed properties do take longer to sell on average due to the nature of the transaction,” says Goslett.
“This could include delays caused by obtaining consent from the owner, vandalised properties, valuation discrepancies, outstanding rates and taxes, non-payment of levies and the like.”
Goslett says when homeowners reach the point where they can no longer afford to stay in their home, the best alternative would be to relook at the finance options or to sell the property for the best price in the shortest possible space of time.
“The primary concern for us, and the financial institutions, is to keep the homeowners in their property and to look for a way for the bank to restructure the debt so that it is more affordable, or to sell the property with minimum impact to the owner’s capital or credit record.”
Should this be the case, he says it is in the homeowner’s best interest to make use of a reputable estate agency that has agents who are qualified to handle the nuances of a distressed sale.
Goslett says homeowners shouldn’t wait until they are about to lose their home to sell it through an assisted sale programme.
“Homeowners who find themselves in financial difficulty have the option of voluntarily selling their home with the assistance of the relevant financial institution which holds the bond in order to avoid a forced sale scenario.
“Here, a distressed properties administrator will be able to arrange for the financial institution that holds the bond to enrol the homeowner on the assisted sales programme, where they would then benefit from the discounts and incentives that the various banks’ programmes offer.”
Goslett says consumers need to continue paying careful attention to their finances and paying down debt as much as possible.
“The key for homeowners who see a financial problem coming in the future due to job loss, a reduction in benefits, unforeseen capital expenditure, possible future interest rate rises and cost of living increases, a death in the family or any event which would impact heavily on finances, is to contact their financial institution or a real estate professional to assist them and discuss the options before it is too late,” he says.
Print
