Luxury homes in South Africa snapped up for a song
Luxury property prices dropped due to tighter credit, rising unemployment, negative investor sentiment and falling home prices, the Alliance Group said on Tuesday. Spokesperson Rael Levitt said even those with ultra-luxury homes were being forced to sell at a deep discount.
"As the residential property recession grows in South Africa, jumbo mortgage loan defaults (which are defined as outstanding mortgage of over R5-million) is growing," Levitt said. "Not surprisingly, shrewd, wealthy buyers are snapping up these bargains," he said.
The Alliance Distressed Asset Index indicated that the residential property market was in the third quarter of a technical recession and that repossession, insolvencies and distressed property in the luxury market jumped in the first quarter of 2009. Mortgage stress, where bondholders were in arrears for two months or less, was showing a sharp increase across the board - from 75 000 in the third-quarter of 2008 to 130 000 in the last. Severe mortgage stress in turn, where bondholders are over four months in arrears, catapulted from 8 000 in the second quarter of 2008 to over 35 000 in the last quarter.
The index also indicated that 80 percent of bondholders who were in severe mortgage stress would, in all likelihood, have to sell or lose their homes. "Although distressed luxury residential property comes off a very low base, it is increasing and the interest rates cuts are only having a muted effect on these jumbo mortgage arrears," said Levitt.
Properties in previously unaffected upmarket suburbs like Clifton, Franschhoek, Camps Bay, Plettenberg Bay, Sandhurst, Hyde Park and Umhlanga had started to trickle onto the market. These homeowners, who had borrowed against their properties, were now in trouble.
"A foreclosed luxury mansion in Sandhurst, Joburg, in December is a case in point. Auctioned by The Alliance Group for R65-million, the property represented the top end of the market."
As homeowners in wealthy suburbs have equity in their homes and were largely unaffected by interest rate hikes, they would not suffer too much because of housing deflation and, therefore, were excluded from mortgage distress. "But the jumbo mortgage defaults we are witnessing tell another story," Levitt said. "We have sold distressed apartments in the V&A Waterfront, wine estates in Franschhoek and beach bungalows in Clifton and Camps Bay."
The Alliance Group was also dealing with several distressed golf estates which should hit the market in the next few months. “With many visitors visiting South Africa for the IPL Cricket beginning on 18 April, the British Lions Rugby Tour kicking off on 30 May and 2009 FIFA Confederations Cup in June, there are golden opportunities for fans to purchase bargain properties in South Africa during their stay,” notes Robert Wilson. CEO of travelinsouthafrica.net .
"As the residential property recession grows in South Africa, jumbo mortgage loan defaults (which are defined as outstanding mortgage of over R5-million) is growing," Levitt said. "Not surprisingly, shrewd, wealthy buyers are snapping up these bargains," he said.
The Alliance Distressed Asset Index indicated that the residential property market was in the third quarter of a technical recession and that repossession, insolvencies and distressed property in the luxury market jumped in the first quarter of 2009. Mortgage stress, where bondholders were in arrears for two months or less, was showing a sharp increase across the board - from 75 000 in the third-quarter of 2008 to 130 000 in the last. Severe mortgage stress in turn, where bondholders are over four months in arrears, catapulted from 8 000 in the second quarter of 2008 to over 35 000 in the last quarter.
The index also indicated that 80 percent of bondholders who were in severe mortgage stress would, in all likelihood, have to sell or lose their homes. "Although distressed luxury residential property comes off a very low base, it is increasing and the interest rates cuts are only having a muted effect on these jumbo mortgage arrears," said Levitt.
Properties in previously unaffected upmarket suburbs like Clifton, Franschhoek, Camps Bay, Plettenberg Bay, Sandhurst, Hyde Park and Umhlanga had started to trickle onto the market. These homeowners, who had borrowed against their properties, were now in trouble.
"A foreclosed luxury mansion in Sandhurst, Joburg, in December is a case in point. Auctioned by The Alliance Group for R65-million, the property represented the top end of the market."
As homeowners in wealthy suburbs have equity in their homes and were largely unaffected by interest rate hikes, they would not suffer too much because of housing deflation and, therefore, were excluded from mortgage distress. "But the jumbo mortgage defaults we are witnessing tell another story," Levitt said. "We have sold distressed apartments in the V&A Waterfront, wine estates in Franschhoek and beach bungalows in Clifton and Camps Bay."
The Alliance Group was also dealing with several distressed golf estates which should hit the market in the next few months. “With many visitors visiting South Africa for the IPL Cricket beginning on 18 April, the British Lions Rugby Tour kicking off on 30 May and 2009 FIFA Confederations Cup in June, there are golden opportunities for fans to purchase bargain properties in South Africa during their stay,” notes Robert Wilson. CEO of travelinsouthafrica.net .
The last time Alliance group sold off bankrupt golf estates such as Simola in Knysna and the Riviera at the Vaal was in 2000.- Sapa
This article was originally published on page 6 of Cape Times on April 08, 2009
