Market tightens despite interest rate decrease, says Levitt
Demand strongest for tenanted retail properties
AUCTION Alliance’s sales produced an accumulative 66 percent success rate in November – lower than its bumper October results but up on equivalent sales last year, says CEO Rael Levitt, adding that the company’s results are often seen as an early indicator of the investment market.
“Demand from cash-rich buyers remains strong, but with more stock expected to be released in the next six months and economic uncertainty continuing, caution still prevails,” he says.
“Despite a further decrease in interest rates, November’s results were not as good as expected in a low interest rate e nv i r o n me n t . We a k b u ye r demand, coupled with banks’ i n c r e a s i n g l y c o n s e r v a t i ve approach to financing commercial and residential prope r t i e s , c a u s e d l o we r t h a n expected sales.”
Auct i o n Al l i a nc e r a i s e d R433 million during November, selling 261 of 396 lots. “This is an increase of 15.5 percent (up by R184.75m) from November last year and 10 percentage points below our previous year-to-date average of 70.1 percent,” Levitt says.
Data from the auctions results analysis system show that in the third quarter of 2010, 446 of 639 lots marketed were sold – a success rate of 69.7 percent – and that sales across the group dipped below 70 percent for t he f i rst t i me this year.
Demand was strongest for t e nant e d r e t a i l p r o p e r t i e s, which reflected an average yield of 8.81 percent, he says. Fifteen commercial properties were sold from a portfolio from the listed commercial property s e c t o r, r a i s i n g a t o t a l o f R98.8m at an average yield of 12.3 percent.
Some 532 lots were sold in all provinces, with the largest concentration of sales in Gauteng, followed by the Western Cape. The Eastern Cape region had the highest confirmation rate, selling 88 percent of all p r o p e r t i e s , a n d Kw a Z u l u - Natal, which had a weak year, enjoyed a late surge in concluded deals, including a successful commercial sale held in Umhlanga, Levitt says.
Sales reflected a range of properties across South Africa, from retail to industrial and leisure, as well as 32 lots of vacant land. “A far higher proportion of sales over the R10m mark arose from liquidations, showing a trend that distressed sales are hitting the top end of all market sectors, including the luxury residential sector, which now seems to be under severe pressure,” he says.
Levitt adds that 148 lots in total were offered for liquidators and financial institutions (37 percent of all sales), reflecting increased financial distress in the property sector. “This was the greatest percentage of distressed properties submitted to sale since these reports started in 2006.”
Investors are looking for value and the most attractive deals, he adds. “The property market is ‘ two-tiered’, with well-let, well-positioned properties being sold for record prices, while vacant properties in marginal locations are attracting little buyer demand.”
Levitt adds: “Buyers are discer ning and those with access to cash are either looking for great value or for properties with reliable cash flow. Buyers are searching for returns, and many are looking at properties throughout the country to satisfy this demand. This has made our remote bidding system, through our digital streaming facility, both popular and a useful tool.”
At the time of writing, Auction Alliance’s yield and sales analysis figures included these sales for November:
Retail Shoprite centre in Waverley, Pretoria, sold for R22m.
Office block in Belvedere Street, Pretoria, sold for R19.8m.
Boutique hotel known as Harbour House, Hermanus, sold for R18m.
Re t a i l c e n t re at 3 6 Gizenga Street, Stanger, sold for R17.43m.
Office block in Johannesburg CBD at 16 Frederick Street, sold for R15m.
Luxury residential unit at 35 Winston Lane, Hyde Park, sold for R10.9m.
Office block in Philip E n g e l b r e c h t S t r e e t , Whi t e River, sold for R10.75m.
Petrol station in Braam Fischer Drive, Kensington, sold for R9.6m.
Distribution warehouse at 3 Hope Street, Kokstad, sold for R9.57m.
Residential house at 12 Killarney Road, Hyde Park, sold for R9.3m.
Development site at Garden and Whisken Road, Witpoort, sold for R9.16m.
Industrial plant in Honeydew, sold for R8.7m.
Block of flats and retail at 418 Point Road, Durban CBD, sold for R8.25m.
Distribution centre at Canal Road, Maydon Wharf, Durban, sold for R8.14m.
Levitt adds that while there were 252 auction lots scheduled for sale in December, including various multiple sales, entries for December sales were closed. The company will be scheduling auctions for January and February.
To discuss buying or selling o f p r o p e r t i e s, c o nt a c t Rael Levitt at email@example.com.