Opinion Piece by:  Rainer Stenzhorn from In2assets Property Specialists

Property auctions in South Africa have a significant impact on the real estate market and the economy. Here are some keyways in which property auctions effect the marketplace.

Increased liquidity

Property auctions provide a platform for buying and selling properties in a transparent and efficient manner, increasing liquidity in the real estate market. High profile and high demand properties achieve record prices on the auction platform. Properties which may be difficult to sell through traditional methods  that requires to be sold quickly  or distressed properties , are most of the time  sold by way of  auction allowing for rapid conclusion  and increased liquidity .

Price fixing

Property auctions  benchmark  market prices  resulting from competitive bidding. Auction prices are indicative of what the Market is prepared to pay in an open, fair and transparent way of transacting. The auction price is testament of the true value of such property determined by the auction itself

Access to investment opportunities 

Property auctions provide equal  opportunities for investors to access a wide range of properties, including commercial, residential, and industrial properties. This allows savvy  investors to diversify their portfolios and acquire properties that are not usually available through other channels, creating great investment opportunities in the real estate market. 

Efficient sales process

Property auctions always entail strict timelines and processes streamlining the entire sales process. Properties are extensively marketed prior to the  auction, with proper due diligence information on each particular property . The sale is entirely un-suspensive and without any room for long drawn-out negotiations. This  results in swift  sales compared to the lengthy conventional  methods of sale.

Solutions for Distressed property .

Auctions are the ideal solution to dispose of distressed properties as well as resolving complex legal disputes. Auctions ensure quicker solutions and rapid recovery of debts. Auctions can be conducted privately and there is no need for costly and lengthy legal actions.

Impact on property values

Auctions can have a significant impact on property values, depending on the demand and efficiency and bidding activity during the auction.  High demand and competitive bidding drives up property prices for the benefit of Sellers . A well experienced Auctioneer will never allow bids way below market value .

Market transparency 

Auctions are public, open and transparent. This transparency creates trust and confidence amongst Buyers and Sellers building confidence throughout the entire auction process and in the auction platform itself. 

Risk of overbidding or buyer's remorse 

Auctions may  pose risks to buyers, as competitive bidding sometimes leads to emotional bidding above pre-decided price offering. It is important for buyers to thoroughly research and assess properties before participating at  an auction,  set a budget and abide thereto as to avoid potential financial risks.

In summary, property auctions in South Africa have a significant impact on the real estate market, providing increased liquidity, price benchmarking, access to investment opportunities, and efficient sales processes. Buyers and Sellers must however always be aware of the risks and challenges surrounding any auction. It is essential to thoroughly understand the auction process and conduct proper due diligence before participating on a property auction ensuring informed decisions at all times.

To have your property assessed and get a free opinion of value and sellability contact Rainer Stenzhorn on rstenzhorn@in2assets.com