By Samantha Bartlett
South Africa’s extended sojourn in the economic doldrums has created a miasma of despondency across the nation over the past year, and it’s knocked the stuffing out of much of the real estate industry.
One sector continues to lead a seemingly enchanted existence through the pervasive gloom, though. But while most would expect distressed sales to be the reason that property auctions are currently flying high, that couldn’t be further from the truth says Joff van Reenen, Lead Auctioneer and Director of specialist real estate company High Street Auctions (HSA).
“In 2017 the company shattered its all-time individual sale by volume record twice, the assets being auctioned were bigger and the vast majority of auction lots we sold were put up by Funds and REITS making portfolio adjustments, corporates disposing of assets and private sellers diversifying their investments.
“Approximately 7% of our auction lots for the year comprised distressed properties.”
Van Reenen says it’s fortunate that the bulk of the property auction industry’s business is Fund and corporate-based, because the process of corporate asset adjustment occurs through all economic cycles.
“Asset registers are assessed frequently for surpluses or redundancies and especially in economic downturns the speed at which a property can be sold at auction compared to through traditional brokers is something corporates find very attractive because it’s a successful, tried-and-tested way to turn non-core assets in cash.
“The sales model also better serves their needs, because once the hammer falls it is standard for the full purchase price to be paid within a month. The transparency, agility and speed are a transactional triangle that works for boards and shareholders, which is among the reasons so many of our clients have been with us for years.
“Sellers and buyers benefit; the latter because they can acquire assets at fair market value as determined by demand on the day, and there are frequently exceptionally good deals to be found.”
Van Reenen says property with a total value of around R4 billion went under the HSA hammer in 2017, with three dominant themes emerging during the year, largely affecting the non-residential sector.