ClareMart Auction Group Chief Executive Officer, Jonathan Russell Smiedt

South African property market prices experienced unprecedented growth in a boom period from 2000 to 2007. This period saw property values increase, in many instances by 253.7%, according to surveys by ABSA Bank. This boom period ended with a global recession, starting in the United Kingdom, and spreading worldwide to affect markets across all sectors.

“The South African ‘Wonder Years’ of property prices ended in the first quarter of 2008. Banks began to rapidly decline 120% bond applications that were being accepted previously for the purchase of many over-price-inflated properties” says ClareMart Auction Group Chief Executive Officer, Jonathan Smiedt. 

Smiedt has observed in the recent years many boom-period purchasers who are struggling and in many cases unable to service the loans on properties bought in some cases in excess of 150% of their value. “Our Group is regularly requested, as Valuers, to appraise property for its true market value. We occasionally find the value to be non-improved or sometimes less than what the purchaser paid for their property in 2007” says Smiedt.

“The market as a result is now seeing many exceptional properties, for which phenomenal prices were paid, being placed on auction or with real estate agencies at prices that would be acceptable to sellers who purchased them in the early to late-mid 2000’s ” says Smiedt. The ClareMart Group is often mandated to sell luxury properties around the country and finds the market resistant to many of these superb residences due to the current financial climate.

“Buyers in 2012, and for the past few years, have been and are still resistant to paying 2007 property prices for two simple reasons. Firstly, the buyer of 2012 is not prepared to be bonded to the maximum capacity or lose his liquidity in order to purchase a property that is priced as if the boom period is still with us. Secondly, the Reserve Bank and commercial private banks have most wisely made borrowing difficult in order to prevent credit spending and to encourage liquidity in the South African economy. This means that the possibility of financing an overpriced property will be more difficult for the willing purchaser. Advice can only be given in this way, if a property is priced at its current market value, buyers will recognise the value and it will be reflected in their offer. The financial institutions, likewise, will see the value in property being bought for contemporary market prices and as such will finance purchasers in that acquisition” adds Smiedt.