Property auctions can be an effective method of selling or purchasing property. Globally, property auctions are an intense, accelerated marketing process involving the public sale of commercial, retail industrial and land assets through what is usually an open, competitive bidding process.
The South African property market was recently rocked by the fall of Auction Alliance, a leading property auction firm who for many years invested large amounts of funds and resources into establishing the auction model as an accepted, effective and trusted mode of trading property.
So how has the fall of Auction Alliance affected the South African property auction industry? We believe that the industry may suffer somewhat given that Auction Alliance was such a significant and established firm, and the fact that there was huge press attention surrounding its demise. The seemingly underhanded practices that Auction Alliance used of planting ‘ghost bidders’ to drive up prices at auction events and allegedly distributing ‘cash envelopes’ to bank employees and other influential parties have undone over a decade worth of time invested by the local property auction fraternity. The result has been a loss of faith in the property auction industry from a consumer perspective.
At the same time, we believe that despite Auction Alliance’s fall from grace, property auctions will continue to fulfill a role in the property industry, particularly as an efficient mechanism for disposal of distressed property in the banking sector. This is an increasing global trend in current times where banks’ exposure to defaulters is ever increasing. In South Africa, this exposure is compounded by expensive holding costs associated with property ownership due to the continued increases in rates and taxes levied by Government