Alliance Group CE Rael Levitt says the company will put 123 residential properties up for auction in September alone. These are all distressed sales where homeowners are forced to sell because they can no longer afford to hold on to their properties. Levitt says in September 2007 the group handled only 12 forced sales.
He maintains that mortgage stress is far more widespread than originally anticipated. The group estimates that at least 55 000 South Africans are currently in arrears on bond repayments by one month or more.
However, Levitt notes there has been a sudden change in investor sentiment over the past two weeks with a 'dramatic' up tick in bidders attending auction days. Levitt believes that the SA Reserve Bank's recent decision to keep interest rate hikes on hold has been the key driver of a more positive mood.
Says Levitt: "It seems that investors now realise if interest rates are peaking they should be investing while the market still offers value. Buyers probably realise that the next six to 12 months will be the best time in 20 years to buy residential property."
Levitt, however, concedes that bidders who attend auctions are looking for cheap deals. That means sellers are more often than not going to walk away with less than what they paid for the property if they bought within the last year or two.
Levitt says the housing market priced between R1,5 and R3m is taking the biggest value knock with prices down by up to 30% on an annualised basis. The extent of the price decline depends on location.
Interestingly, Levitt notes that the top-end of the market, typically priced at R10m and above, has to date been relatively immune to price declines. He says properties at this end of the market are still fetching full value under the hammer.
Levitt expects further price declines into 2009 and an increase in mortgage stress, which always has a lag effect after interest rates have spiked. He says despite the recent turn in sentiment, the market will remain burdened with the high cost of borrowing for some time to come. Says Levitt: "The housing market is definitely not out of the woods just yet." - By Joan Muller
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