Green shoots at last?

Published May 15, 2019

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There are signs of increased activity in the property market, which might signal an upturn following the elections, says Paragon Lending Solutions chief executive Gary Palmer.

The first quarter of this year was very tough and people took some “real losses” after a relatively stagnant 2018. “Property owners have stopped waiting for the market to improve before they sell. That’s excellent news for brokers and buyers, particularly in Johannesburg which is less sentiment-driven than the Cape Town market.

“We have now reached a point where prices are realistic, given the current state of our economy, and buyers are taking interest.” Aucor Property has “definitely seen an increase in sales activity”, says managing director Greg Want, adding that both buyers and sellers “are more decisive and motivated to transact”.

Both the volume and the value of transactions increased by over 30% in the first quarter of this year compared to the same period last year. Palmer says the change is largely driven by property funds and large corporates selling off holdings.

“The funds propped up the market for several years as major buyers, but vacancy levels are high because of the low level of economic activity, and they’re now selling. Corporates are also looking for liquidity and there are more distressed sales. As a result, there are a lot of good assets on the market right now, at realistic prices. “There has been very active bidding at property auctions in the past few weeks, which I haven’t seen for a long time.”

He says many individual buyers are looking for deals, particularly high net-worth individuals, and that people make their money when they buy, not when they sell.

“So now is a good time to invest,” he says. Further, the number of buyers is matched by lenders looking for investment opportunities. “Lenders are sitting on a lot of cash and willing to expand the range of deals they will consider. But buyers need to be ready to move fast when opportunity presents itself,” Palmer says.

Prospective buyers should put themselves in the best possible position to conclude a successful deal, by ensuring their financial affairs are in good order before they start.

“It’s essential to have all your tax, financials and Fica documentation up to date and signed off by an auditor before approaching a potential lender. This market moves fast, and if a deal is delayed because the buyer needs to finalise last year’s accounts, it will just annoy the lender and waste everyone’s time.”

With no unpleasant surprises in the elections, Palmer says: “We are seeing clear signs that people are getting ready to re-invest. The uncertainty of the past year has been deeply damaging, but if all goes well, we hope to see more green shoots.”

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