Leading asset services and auction Company, Alliance Group, is launching
several products to assist cash strapped consumers, struggling businesses
and their financiers deal with distressed properties and assets, announced
Chief Executive, Rael Levitt in Johannesburg today.
The Alliance Group has launched a US-initiated recovery product aimed at
thousands of struggling South African home owners who are falling into
arrears. According to Levitt the combination of decreasing property values,
increasing interest rates and a global credit meltdown has put the local
residential property market in a precarious position this year.
"We are now in the mid-cycle phase of a residential property slowdown and
mortgage stress is spreading across the country. Over geared middle income
families are the most vulnerable but we are now seeing some up market homes
hitting the distressed sales markets."
Research from Alliance reveals that 55,000 South Africans will suffer
mortgage stress by September this year, 15,000 of those will be in severe
stress and 8,000 could lose their homes because they can't meet the loan
repayments. Mortgage stress is defined as being unable to meet repayments
without refinancing, with many having to re schedule bond repayments.
" They are sobering figures', says Levitt " Yet probably the scariest
finding from our research is that once someone is in severe stress there is
a 20 per cent chance of being forced to sell the property and there is only
a 50 per cent chance of getting out of mortgage stress altogether".
Levitt explains that the lesson struggling homeowners should adhere to when
in trouble, is that "you just can't ignore it and hope things will improve.
The quicker you take action, the better your chances of beating the
financial survival odds".
Alliance has thus launched its bespoke Recovery Auction Programme after
researching a similar product in the struggling US housing market where over
270,0000 homes were repossessed in June alone.
"The product assists defaulting homeowners in selling their properties in a
voluntary and non-legal sales channel whilst working closely with the banks
and bondholders to minimize debt write-offs". This will ensure that
distressed South African homeowners voluntarily and quickly sell their
properties prior to or early in the debt arrears cycle to avoid the time
consuming costs of interest roll up, arrear rates and taxes, lengthy legal
processes and other associated costs. " The Recovery Programme will aim to
preserve the dignity of the distressed client and make him a willing and
active participant in resolving his financial predicament while facilitating
the banks aim of reducing bad debt exposure", says Levitt.
Several banks have already signed up to the Recovery Auction Programme and
the banks themselves are counselling their defaulting and distressed clients
with whom sales mandates will be signed directly. Banks are being trained to
advice clients rather to sell their homes if there is no other manner to
resolve their distressed financial situation. "We have never seen such
appetite from both the banks to come up with innovative debt recovery
solutions, whilst defaulting homeowners are also looking for any way to
avoid legal process and the Sheriffs sales in execution".
The first RAP sale will be held in Waterkloof, Pretoria with 15 properties
coming under the hammer this week with a total value of R50million.
Thereafter sales will be rolled out in Johannesburg, Vanderbijlpark, Durban
and Cape Town. "Within the next two weeks we will have sold over 60
properties through this recovery programme".
One of the most interesting issues, according to Levitt, is that there is
strong investor and end-user appetite for these types of residential
properties. "A lot of people have made a lot of money through property
trading over the last five years and there is currently unprecedented
interest in picking up good deals at auction. We have never seen our auction
floors as busy as they are but buyers are looking for value and these are
the forums where they can achieve this." According to Levitt, "For the
residential investor, trader and smart first time home owner there is
currently a perfect storm to purchase residential property. With
decelerating prices and accelerating rentals the next 12 months will land up
presenting the bargain basement deals that everyone regrets that they didn't
capitalise on when the markets rise again". It's the old adage "You should
buy when everyone is selling and sell when everyone is buying", advises