Surge in houses up for auction in Johannesburg – here’s why

The northern suburbs of Johannesburg are filled with ‘On Auction’ signs, with many sellers trying to navigate the buyer’s market.

“There are more sellers than buyers in the market at the moment, and stubborn inflation and high interest rates are still keeping a lid on demand,” said Denese Zaslansky, CEO of the First Realty Group.

South Africa has been sitting in a 15-year high interest rate cycle, with the repo rate stuck at 8.25% and the prime lending rate at 11.75% for the past 14 months.

Economists expect the South African Reserve Bank (SARB) to once again hold rates at its coming meeting for July, with the most optimistic forecasts pointing to a start to a cutting cycle in September and the most pessimistic warning that cuts may only come in the new year.

With rates at the current highs, though, many homeowners who bought into the market when rates hit lows in 2020 are now finding themselves paying on average an extra R4,247 per month to cover their loans on top of the other rising costs of living.

As such outstanding home loan balances have increased by 7.6% year over year, and many homeowners are trying to sell up fast.

Zaslansky noted that many are going the way of auctions, as this has proven to be a much quicker way to sell.

“Sales by traditional means are slower than usual, but many owners are in a hurry to sell, and they are increasingly finding that the best way to get the fast results they want is to put their home on auction,” she said.

“We often come across owners who need to sell fast, to meet a deadline on relocating to take up a new job, for example, or because they need to liquidate funds for debt reduction or other investments, or because there has been a sudden change in their family circumstances.”

“Others simply don’t want to deal with lots of viewings by potential buyers. And our advice to such sellers is usually to put their home on auction.” 

She said that real estate auctions are no longer automatically associated with home repossessions or seen as a desperate attempt to sell a dilapidated or derelict property.

A significant benefit for sellers and buyers is getting an instant snapshot of the exact value of the market, as the bidders represent it at the auction.

Zaslansky said that auctions also have several other advantages for sellers, such as targeted and intensive marketing efforts that can attract as many buyers as possible within a short timeframe.

In addition, serious buyers usually have large amounts of cash, reducing the risk of deals falling due to financing issues.

Auctions also create a sense of urgency and competition among buyers, encouraging them to offer more than they might in a private sale.

In addition, the auction process eliminates lengthy and potentially stressful price negotiations, as the highest bid is typically final.

Auction sales are also unconditional, meaning they don’t depend on the buyer’s ability to obtain finance.

A quicker sale also means that holding costs for the property are lower as it is transferred to the new owner, such as rates and taxes, insurance premiums and maintenance costs.

Sellers also pay zero commission, as this is added to the successful buyer’s bid.

Meanwhile, property buyers enjoy several benefits, such as lower asking or reserve prices, as sellers are motivated.

The auction process is also typically faster than traditional home buying, with the transaction moving quickly to ownership after the bid is accepted.

Auctions are transparent, with bids visible to all participants so buyers can see their competition and make more informed decisions about the property’s value.

“However, it’s also critical for potential buyers to conduct thorough research and due diligence before participating in a home auction and to understand the risks involved so that they can be sure they are making a sound investment decision,” said Zaslansky

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