Extraordinary property bargains coming onto the market

• Distressed properties, coupled with the current low interest rates, have resulted in exceptional buying conditions which will likely stay put for some time.
• Favourable sales are still possible as long as properties are priced and marketed strategically.
• The rental market is experiencing a serious oversupply of properties since the pandemic.

Some extraordinary bargains are coming onto the market in the form of distressed properties. This, coupled with the current low interest rates, means the exceptional buying conditions experienced over the last year will likely be staying put for some time.

This is the view of Tony Clarke, MD of the Rawson Property Group. He says the distressed properties are a sad commentary on the financial pressures on consumers, but Rawson is aware of at least one bank whose distressed portfolio has literally doubled in recent months.

For the sixth consecutive time, the South African Reserve Bank has announced no change to the repo rate, maintaining its multi-decade low of 3,5%. This comes on the back of stronger-than-expected economic growth in the first quarter of 2021, but disappointing recovery in industrial sectors due to ongoing electricity supply issues and recent riot activity.

Clark says as long as the economy remains under this level of pressure, it makes sense for the Reserve Bank to support investment through accommodative interest rates. “It is possible that inflation could trigger an interest rate increase in the near future, but realistically, I don’t see this happening before mid-2022.” 

He says low interest rates are not the only factor making this a good time to buy. “Preferential interest rates to qualified buyers have opened up extremely attractive investment opportunities for those in the know.”

As for sellers, Clarke says competition is high, but favourable sales are still possible as long as properties are priced and marketed strategically. “Buyers are bullish, but they’re not about to spend more of their hard-earned money than necessary. Listings need to demonstrate a clear value proposition. Those that do, are selling faster and for far better prices than properties that miss the mark on their positioning.”

It is a different scene for the South African rental market, however, which has experienced a serious oversupply of properties during the pandemic. Jacqui Savage, National Rentals Manager for the Rawson Property Group, says a combination of factors has reduced the number of willing and able tenants.

“On the one hand, we have tenants taking advantage of the low interest rates to buy instead of rent,” says Savage. “On the other, we have tenants who – under extreme financial pressure because of the pandemic – are looking to cut costs wherever they can. As a result, the pool of qualified tenants on the market has been shrinking and landlords are having to accept far lower rentals to avoid expensive vacancies.”

Successfully navigating these conditions, has become a time-consuming and delicate task, with properties taking up to two months to tenant successfully in certain circumstances. Savage says the skills and expertise of experienced rental agents are paying tangible dividends in the form of faster results, more reliable placements and less contentious lease negotiations.

“The key at the moment is to minimise short-term losses while safeguarding long-term growth and rental asset value. That’s a whole lot easier with the strategic support of an experienced, tech-enabled agent who can avoid pitfalls while preparing for future opportunities.”

Despite South Africa’s uncertain economic outlook, both Clarke and Savage say property remains a safe long-term bet.

“Historically, property is one of the most secure and stable investments to have in times of upheaval,” says Clarke. “We have every reason to believe it will continue to prove its value as we overcome the latest challenges to our country’s economic recovery.”