"The market was worth an estimated R6bn a year before the Auction Alliance scandal early last year. It's down to R1,5bn,'' says High St Auction Co's joint managing director Lance Chalwin-Milton.
That's despite a number of new auctioneers entering the sector and existing auctioneers jockeying to fill the gap left after the demise of Auction Alliance.
The drop in sales 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," he says.
Kleynhans believes the sector has ultimately benefited from the Auction Alliance debacle.
"Deals are done on merit and are not based on historical relationships," he says. In many cases banks can't afford to auction off distressed properties as market values are much lower than the outstanding mortgage.
Kleynhans and Chalwin-Milton 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 hangover of distressed properties given the worrying state of consumers' financial position.
Source: Financial Mail via I-Net Bridge
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