Challenging times see top properties taken to auction
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 firstname.lastname@example.org.