WORDS: DEBBIE HATHWAY :: IMAGES: SUPPLIED
We talk to Ari Ben, CEO of AuctionInc, about South African market appetite for selling real estate on auction
Five bedrooms, 30 open houses, one bid. Sound familiar? Perhaps you’re a fan of the Australian comedy-drama series Five Bedrooms about five people who bond at the singles table at a wedding and after a few too many drinks decide the solution to their troubles is buying a house together – on auction.
Ari Ben
In Australia, more than 80% of real estate is sold this way, according to Ari Ben, CEO of Joburg-based AuctionInc. Five Bedrooms shows what it’s like to bid on a home in person on site but many companies have successfully explored the online auction space too.
Savills Australia had their biggest December sale in five years in 2020, despite the pressure of lockdown, closing 30% higher than in 2019. They noted continuing momentum in a blog post that described “genuine demand across all asset classes as well as a cross-section of active buyers. “The key takeaway is that all are looking to transact on good-quality property, be that in terms of location, build type, investment opportunity or potential yield.”
In the UK, Savills Auctions have raised more than £260m by selling 750 residential, commercial and mixed-use lots in the first half of 2023. Savills Auctions director Jeremy Lamb said they continue to see an appetite for property despite further interest rate rises. Many well-priced properties achieved more than their guide prices at their final mid-year sale showing that buyers are still eager to transact and place their confidence in bricks and mortar.
A similar trend is emerging in SA as the methodology gains traction. “People are becoming more comfortable with the approach, which wasn’t necessarily the case 10 to 15 years ago. The traditional sale methodology is outdated, partly overshadowed by the move to digital since the pandemic, and selling property on auction (physically, online or both) offers several advantages,” says Ben.
ADVANTAGES OF PROPERTY AUCTIONS
Extensive marketing: The marketing of property on auction is extensive and often gets better reach than a traditional estate agent can. AuctionInc promotes auctions via multiple channels, including its database of more than 50,000 qualified purchasers, digital platforms such as property-focused websites and boards outside the property.
“We have a licence to market via outdoor posters, which is not available to estate agents, municipal by-laws permitting. The City of Cape Town only allows events to be advertised on street pole ad sites,” says Ben. “Then we actively hunt for a buyer. We don’t just sit and wait for the phone to ring one day.”
Pricing benefits: Assuming there is competition for the asset, the bidders compete against each other for the property, which has a positive effect on the price that the auctioneer can achieve. “For example, a seller wanting R1m for a property, selling through a private real estate agent, may be faced with offers below the asking price, resulting in a haggle between the buyer and the seller. With an auction, bidders will compete for a lot until they run out of steam, often to the seller’s benefit,” says Ben. On the same note, buyers know they are dealing with a serious seller, which often results in a fair price for the purchaser.
Transparent process: When you buy property through an estate agent, you don’t know who you’re up against whereas at a physical auction, you can see who is in the room with you and who you are bidding against.
Quick result: Ben rates this point as the most important. “The auction process is extremely rapid. We’re selling properties, on average, in three to four weeks.”
Sense of urgency creates hype: The event generates much hype, which creates urgency. “The general psychology of a buyer is that they don’t want to miss out. We have many instances of a property being on the market the traditional way for months and not selling until an auction board goes up and suddenly a neighbour wants to buy it. It’s a phenomenal thing to see, but it happens repeatedly. That urgency kicks in and people transact so that’s also a huge advantage,” says Ben. Ultimately, it’s a win-win. An auction is a platform that brings serious buyers and sellers to the table, with the intention to transact.
Ben explains that the sellers are there because they mean business and will likely accept a genuine offer. That benefits the buyers because they’re not dealing with sellers just testing the market. He has also been getting enquiries from major institutions (banks and pension funds) looking to trust the sale of their assets to AuctionInc purely because they know there will be a result. “It might not get the price they are looking for, but there will be a definitive result on the auction floor. And I think that’s important, especially for a seller of residential property who is leaving the country and has been trying to sell their property for six months. It depends on the property type – but an auction is generally seen as a methodology that’s effective.”
Visit auctioninc.co.za for auction dates and content.
Auctions are held on location at Masingita House, 41 West Street, Houghton.
Buyers can bid on-site or via telephone.
