Economic conditions around the globe have remained depressed and consumers the world over are still battling to control their levels of debt and adjust to the financial demands of the increased cost of living. The property industry predicts that distressed properties will remain a reality during 2012.
During 2011, a fair amount of the distressed property supply was mopped up. For example, the RE/MAX Distressed Property Division handled over 750 distressed property sales around the country through various financial institutions last year. These properties were valued between R500 000 and R4-million and the company managed to achieve an average of 90 percent of the asking price for the properties, with 80 percent of the homes sitting on the market for less than 45 days.
When it comes to handling distressed properties, the main aim is to keep people in their homes and the South African banks are very proactive in assisting home owners who find themselves in financial difficulty. However in the instances where there is no other option but to sell the home to assist the home owner in reducing his level of debt, banks will make use of distressed sale programmes to assist in reducing the home owner’s liability and the period of this liability.
When home owners reach the point at which they can no longer afford to stay in their homes, the best alternative for both the home owners and the financial institutions that hold the bonds is to sell the properties for the best price in the shortest possible space of time.
While distressed properties in South Africa are not expected to hit the 50 percent in 2012 mark, the amount of distressed homeowners will more than likely increase in the year ahead. However, the industry expects that the distressed property situation will correct rapidly from the beginning of 2013, assisted by steady price increases in the lower price ranges and a resolve from homeowners to reduce their levels of debt.