South African Commercial property boom
Residential property sales may be declining and prices returning to realistic levels, but the opposite is true in commercial property auctions
Residential property sales may be declining and prices returning to realistic levels, but the opposite is true in commercial property auctions.
Eddie Winterstein, CEO of auction house Aucor, says the company is finding it difficult to keep up with the number of commercial properties being sold.
“To cope with the deluge, we have recently had to increase our multi-property auctions from once a month to twice and at each auction we usually sell about 15 properties,” Winterstein says.
One factor boosting the popularity of property is low interest rates.
He says that these days a R10-million property purchase is not out of the question for the private individual, who tends to favour small shopping centres that return better rents than office space.
“They put down a good deposit, take a loan for the balance at around 8%, lease it out at 12%, get a family member to run it – saving on high management fees – and this makes a nice retirement income. Bought in the right location, it is also an appreciating asset,” Winterstein says.
He says constant rationalisation of the property portfolios held by the larger institutions is another reason for commercial property changing hands.
For example, an institution may decide to sell off all properties under R5-million and replace them with only properties worth R20-million and above. Some banks have changed from owning property to buying shares in the property market.
“Buyers are a mix of institutions and individuals. In addition, good raw land is selling for high prices as there is not enough of it available,” Winterstein says.
Rael Levitt, chief executive of Auction Alliance, says there is no doubt that auctions have become the preferred way of selling commercial and industrial property. “We conducted over R1.5-billion in these sales last year,” Levitt says.
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