Akin to the ‘open’ market, 2016 is shaping up to be a tough year for the auction property market. So say Jaco du Toit and Nic Techmann of Park Village Auctions who explain that most market indicators point to challenging times.
Says Du Toit: “Several factors are lining up locally. These include, amongst others, the sharp depreciation in the value of the Rand, the drought which is pushing up the cost of food and a strong possibility that the South African Reserve Bank (SARB) will increase the interest rate incrementally throughout the year. There are numerous global issues which are casting a pall over the economy too. Collectively, what this means is that there is a lot less confidence and liquidity in the property market which impacts bidders’ ability to buy properties at auction.”
While the property market as a whole will probably experience a slowdown and new development will probably taper off, both auctioneers anticipate that properties which fall into the more expensive price brackets will be hardest hit. First time buyers will also probably struggle to commit to purchases in the months ahead.
It’s not all doom and gloom though. They reckon that properties which fall under the R1m to R1,2m banner will probably continue to move quite quickly as there is still fairly strong demand for properties of this nature.
Surprisingly, the drought might also yield some positivity for industrial properties in some regions notes Du Toit. He explains that he has heard reports that industrial properties are being bought by buyers looking to diversify their farming interests by purchasing industrial property. Whether or not this represents the beginning of a sustained upward trend remains to be seen of course.
Du Toit explains that Park Village Auctions has also witnessed a lot of growth amongst the black middle class and that the company is fielding significant demand for auction properties from this segment. He says that the company is hoping to harness this demand and turn it into a highlight of 2016.
Techmann adds that cash bidders on the lookout for ‘fixer-uppers’ and buy-to-let properties at auction will probably do particularly well too. As for those who already have rental properties, Techmann advises holding back on increasing rentals in the short term which should entice tenants to take up occupation.
On balance, although 2016 will probably be a tough year, Du Toit and Techmann believe that there will be opportunities and that certain pockets of the property market will perform well. In closing, they advise people to sit tight, trim expenses where they can and avoid taking on unnecessary debt.