Park Village Auctions’ Clive Lazarus shares his thoughts on how the Covid-19 national lockdown will shape the commercial property auction landscape.
In over three decades, PVA has seen the South African property market fare against some tumultuous times. Although none quite as extraordinary as a global pandemic, experience—says Clive—shows that the market will react to this crisis as it has to others in the past. He expects there to be an influx of commercial property stock after the lockdown and, with this, auctions rise as a favoured sales mechanism.
Clive “Businesses will need to raise capital fast, or drastically reduce operational expenditure, to continue operations. Lockdown has taught us just how capable we are of successfully managing distributed teams. This means that companies with properties will most likely want to downsize their physical office space and realise their needed-liquidity through their immovable assets.
“Auctions offer the swiftest and most effective means to sell when the market is down.
“Trusts; concerns; and estates that need money can’t afford weeks of show days followed by written offers that include suspensive conditions, such as ‘subject to bond approval’, which could see the whole deal fall through.
“Buyers are want to try to haggle their price down with agents—especially if they feel they have the upper-hand in a buyers’ market. Auctions eliminate that process.
“Properties are sold ‘voetstoots’ and payment is due within a finite period after the fall of the hammer. So, sellers enjoy payday faster and what’s more, is that buyers pay commission and auctions tend to fetch more than the reserve price.
“Bidders come to auctions prepared to buy. They know the terms before the sale starts and need just put up their hands on a price they are willing to pay.”
All in all, Clive says that the basic principles of property investment preside: “it pays to buy in a down market”, and “cash is king”.
Clive: “A down market almost always presents an opportune time to invest in property. When the market eventually turns, you enjoy handsome gains. Should you ever need cash in the future, it is held in your property.”