Mar­ket tight­ens de­spite in­ter­est rate de­crease, says Levitt

De­mand strong­est for ten­anted re­tail prop­er­ties

Weekend Argus (Saturday Edition) - - AUCTIONS -

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 rlevitt@auc­tion.co.za.

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