Commercial Property Auction Market in South Africa:
A Preferred Method for Disposing of Commercial Properties
The commercial property auction market in South Africa has experienced a significant shift in recent years, with more property owners and investors opting to sell their commercial properties through auctions. This method of disposing of commercial properties is gaining popularity for a variety of reasons, which include efficiency, transparency, and increased competitiveness. Swindon Property analysed the current status of the commrcial property auction market in South Africa and explore why auctioning commercial properties should become the preferred method for many property owners and investors.
According to recent data from the South African Institute of Auctioneers (SAIA), the commercial property auction market in South Africa has witnessed steady growth in recent years. “In 2020, despite the challenging economic climate due to the COVID-19 pandemic, the total value of commercial properties sold at auction in South Africa reached an estimated R4 billion, up from R3.7 billion in 2019,” says David Arton-Powell Swindon’s regional manager for auctions. “This indicates a resilient and thriving market for commercial property auctions in the country.”
For many years, comparable international property markets have used the auction model as a standard for the selling and buying of all types of property. In Australia, auctions are a common method of selling commercial properties, especially in the major metropoles like Sydney, Melbourne, and Brisbane. Historically, auctions have always been popular in the Australian real estate market, with some figures quoting more than 80% of all residential and commercial properties as being sold through this method.
One of the key reasons why disposing of commercial properties through auctions is gaining popularity in South Africa, and why it has been so popular in the Australian market, is the increased efficiency of the process.
Traditional methods of selling commercial properties can be time-consuming and often involve lengthy negotiation periods, not to mention sifting through many enquiries in order to properly qualify legitimate buyers. “In contrast, commercial property auctions offer a streamlined and accelerated process,” says Arton-Powell. “Properties are typically sold on an ‘as is’ basis with clear terms and conditions, and a fixed auction date. This reduces the time and effort required to market and sell a property, making it an attractive option for property owners and investors who are looking for a quick and efficient sale with a fair market-related price.”
Transparency is another factor driving the preference for commercial property auctions in South Africa. Historically, the South African real estate industry in general has been plagued by a perception of hidden or covert transactions. Modern online auctions are conducted in a public forum, with an open and transparent bidding process. This allows potential buyers to see the competition and make informed decisions based on real-time bidding activity. “Additionally, auctioneers are required to provide comprehensive information about the property – including legal documentation and property disclosures – before the auction,” says Arton-Powell. “This transparency instils confidence in buyers, who have access to all relevant information upfront, which reduces the risk of surprises or hidden costs after the sale.”
Competitive pricing is also a significant factor contributing to the increase in the popularity of commercial property auctions in South Africa. Auctions create a competitive bidding environment, where multiple potential buyers compete to secure the property. This often results in properties being sold at market value or even above, as buyers are motivated to outbid their competitors. Auctions also provide an opportunity for buyers to set their own price limit and bid accordingly, allowing them to exercise control over the purchasing process.
Commercial property auctions also offer sellers the ability to reach a wide audience of potential, qualified, buyers. “Auctions are heavily marketed through various channels, including online platforms, print media, and direct marketing to potential investors,” says Arton-Powell. “This widespread marketing increases the exposure of the property to a larger pool of potential, motivated buyers, resulting in increased competition and better chances of achieving a higher sale price.”
As the market continues to evolve, commercial property auctions are likely to emerge as a preferred method for disposing of commercial properties in South Africa, providing an effective and transparent avenue for property owners and investors to achieve their sales objectives.