It appears the auction industry is still feeling the effects of the Auction Alliance ghost bidding scandal. The total value of property sales concluded under the hammer is down 75% in the past 18 months.
“The market was worth an estimated R6bn/year before the Auction Alliance fall-out early last year. It’s down to R1,5bn,’’ says High St Auction Co joint MD Lance Chalwin-Milton.
That’s despite a number of new players entering the industry and existing auctioneers jockeying to fill the gap left by the demise of Auction Alliance.
The drop in sales volumes is believed to be largely a result of banks keeping their distressed residential property stock off auction floors since allegations of collusion between auctioneers, banks, liquidators and attorneys emerged in January last year. Chalwin-Milton expected a strong recovery this year, as banks are still sitting on large volumes of distressed stock. But that hasn’t materialised.
Mark Kleynhans, who joined SA’s oldest auction company Aucor in mid-2012, says despite the large backlog of distressed properties on banks’ mortgage books, this hasn’t yet filtered through to auctioneers. “Banks are using their own online sales portals and conventional real estate agents instead.’’ Kleynhans believes the industry has ultimately benefited from the Auction Alliance debacle.
“Deals are now done on merit only and not based on historical relationships.’’ And in many cases banks can’t afford to auction off distressed properties as market values are much lower than the outstanding mortgage debt.
Kleynhans and ChalwinMilton say commercial property owners still see auctions as the quickest, most transparent way to sell an office block.
home loans, SA’s largest mortgage lender, concedes the market is still struggling with “historically high†levels of mortgage arrears. He says it is likely to take at least two years to get rid of SA’s overhang of distressed properties given the worrying state of consumers’ financial position.
Standard Bank prefers to use estate agents or its own channel, “EasySellâ€, to offload distressed properties.
