Chal­leng­ing times see top prop­er­ties taken to auc­tion

Weekend Argus (Saturday Edition) - - PROPERTY -

EX­CIT­ING op­por­tu­ni­ties arise in un­cer­tain and dif­fi­cult times, says Nor­man Raad, chief ex­ec­u­tive of Broll Auc­tions and Sales.

“At our last two auc­tions we ex­pe­ri­enced an in­crease in con­fir­ma­tions of trans­ac­tions be­fore or on auc­tion days – the main rea­son be­ing that sellers are be­com­ing more re­al­is­tic in terms of mar­ket-re­lated ex­pec­ta­tions,” he says.

“Most prop­erty own­ers have en­joyed a tremen­dous run, due to low in­ter­est rates and a de­vel­op­ing econ­omy. How­ever, this curve has taken a turn, with all the indi­ca­tions of this ap­par­ent for over a year, cou­pled with our plum­met­ing cur­rency in De­cem­ber. Sellers are ex­er­cis­ing cau­tion and are con­cerned about what the fu­ture holds and this has been dis­played by the in­crease in prop­er­ties reach­ing the mar­ket.”

Raad says that since launch­ing in March 2015 Broll Auc­tions and Sales has sold more than R1 bil­lion worth of com­mer­cial prop­erty around the coun­try. These in­clude the sale of a res­i­den­tial block with nine apart­ments in Hill­brow, Jo­han­nes­burg which fetched R420 mil­lion; a Sand­ton of­fice block which was sold for R85m; a shop­ping cen­tre in Queen­stown for R63.8m; a re­tail and parkade prop­erty in Jo­han­nes­burg CBD for R45m; and an of­fice block in Morn­ing­side, Dur­ban for R40.2m.

An­other prop­erty, the 318ha River Song in Gaut­eng, was sold for R32m.

“With the Hennops River run­ning right through it, this beau­ti­ful prop­erty of­fers a va­ri­ety of mag­nif­i­cent view sites and should devel­op­ment rights be granted, this should be­come a pop­u­lar es­tate ide­ally po­si­tioned close to Sand­ton,” says Raad.

“It seems that the head­winds ex­pected for the prop­erty sec­tor have made their im­pact felt. It’s a buyer’s mar­ket at the mo­ment, with few prop­er­ties at­tract­ing lit­tle or no in­ter­est mainly be­cause of the dif­fi­culty in rais­ing fi­nance, linked to the ex­pec­ta­tions that the mar­ket won’t ex­pe­ri­ence a pos­i­tive spin in the fore­see­able fu­ture.

“The buy­ers are still here, but they are in­vest­ing their money pru­dently. On of­fer at our last auc­tion two high pro­file res­i­den­tial blocks com­pris­ing stu­dent ac­com­mo­da­tion in Braam­fontein and Park­town in Gaut­eng were sold for R17m and R13.25m. A re­tail cen­tre with na­tional an­chor tenants in Dundee, KwaZulu- Na­tal at­tracted tremen­dous in­ter­est and com­pet­i­tive bid­ding, fi­nally sell­ing for R31.3m.”

Raad says res­i­den­tial prop­erty is and will con­tinue to be the most ro­bust in­vest­ment if well man­aged. The new funds have al­ready emerged and snapped up a lot of the larger res­i­den­tial build­ings, but as for the emerg­ing res­i­den­tial in­vestors, they are ag­gres­sively start­ing to bulk up, un­der­stand­ing the need for high de­mand for res­i­den­tial ur­ban­i­sa­tion.

“Ac­com­mo­da­tion in South Africa is slowly be­com­ing a priv­i­lege as the de­mand in­creases and avail­abil­ity and devel­op­ment is lim­ited or lag­ging be­hind. There are just not enough apart­ments or homes to sat­isfy the ex­ist­ing and grow­ing needs of our coun­try – and es­pe­cially close to or within the greater metropoli­tan ar­eas.

“New mar­ket en­trants com­pet­ing for the same op­por­tu­ni­ties have driven the price up be­yond ex­pec­ta­tions. Qual­ity con­ver­sions are yield­ing far lower re­turns than be­fore, how­ever the rental mar­ket which is sup­ported by the emerg­ing busi­ness sec­tor work­ers re­mains strong.”

Raad says in­vest­ing in bricks and mor­tar will re­main on in­vestors’ radar, and even though the REIT (Real Es­tate In­vest­ment Trust) sec­tor has made cap­i­tal­is­ing on prop­erty re­turns eas­ier and very profitable, own­ing prop­erty is al­ways a great long term in­vest­ment.

“Re­tail cen­tres and res­i­den­tial build­ings are still at­tract­ing very low yields. The Dundee Sho­prite cen­tre re­cently sold on auc­tion fetched sub 9 per­cent and was a tar­get even for smaller REITs.

“As the econ­omy be­comes more con­strained for var­i­ous rea­sons, the op­por­tu­ni­ties will be­gin to sur­face. Al­though it may seem ex­pen­sive and a dif­fi­cult de­ci­sion to buy prop­erty in this econ­omy, it doesn’t take a lot for mar­ket sen­ti­ment and con­di­tions to change and then for com­mer­cial prop­erty to find some real growth again.

“I be­lieve it is never the wrong time to buy good prop­er­ties. Over time they al­ways in­crease in value and it is an as­set that will al­ways re­tain an in­fla­tion hedge,” says Raad.

Call Bradley Stephens on 087 700 8269 or 082 443 7731 or email bstephens@broll.co.za.

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