Want to know where bubble will burst? Property in R2m-R5m category, golf estates, holiday homes, some commercial among expected bargains - top auctioneer.
As estate agents brace themselves for tougher business times following seven interest rate increases in the last year, auctioneers are getting ready for a big uptick in forced sales.
What's more, they're not counting on the super-rich or those who live in average or even modest homes to give them the bulk of business.
They're expecting a rush of properties in the R2m to R5m price range and golf estate and holiday homes to the market, as higher income earners feel the pressure of rising interest rates.
This was the message from Alliance Group chief executive officer Rael Levitt, following the latest interest rate hike announcement on Thursday.
Sale in execution notices are already up dramatically and at levels not seen since the late 1990s, he said.
Levitt said that certain sectors of the residential market will be worse affected than others.
"The upper-end residential property market seems impervious to interest rate movements and transactions above the R10m mark have not slowed down."
This market, he said, is "dependent on wealthy locals and currency-rich foreigners who are not mortgaging themselves to the hilt to get into the market".
As a result, estate agents who operate in Sandhurst, Clifton and Zimbali continually report high record value deals.
"Low value homes below R1m also seem to be not that badly affected because the financial variances on another 50 basis points is not dramatically significant and this is the entrant market for most new homeowners who budget accordingly," he said.
Several banks have been "upscaling their credit control and loss departments" to keep up with "an anticipated slew of foreclosures" in the R2m to R5m market.
Levitt compared the interest rate hikes to a tyre with a slow puncture. "Every time there is another hike, the tyre deflates a little more".
"One must remember that the historic low interest rate cycle is what caused the market to boom in the first place. Any fall in interest rates increases asset values with real estate appreciating sharply. A hike in rates has the opposite effect."
Levitt said he does not believe bad debt is at alarming levels, however the "current foreclosure rates have not been seen in the economy for several years".
The auctioneer said he believed that "we will see a couple of inexperienced commercial property investors who will become forced sellers and a couple of them going to the wall".
There are business owners who overpaid and may be "feeling the pressure" on high value financing deals", said Levitt.
He noted that Mboweni's actions may slow down the rate of inflation, but "will cause major financial stress to many borrowers and their opportunistic financiers".
"In the US, when the housing sector seemed jittery and the sub-prime crisis emerged, the US Federal Reserve cut interest rates to avert a systematic recession."
The SARB, pointed out Levitt, seems to be heading in the opposite direction, increasing rates "into a jittery property market".
