The auction floor today is where the rubber of economic theory meets the road of investor sentiment, says Greg Dart, a director of High Street Auction Co, a pioneer in the South African auction space.
Speaking ahead of High Street’s latest multi-property auction – to be held August 21 at Bryanston Country Club – Dart and Professor Adrian Saville, a leading economic strategist at the Gordon Institute of Business Science, agreed that, during times of geopolitical uncertainty and volatile investor sentiment when the property market is under pressure, property auctions act as real time barometers revealing what buyers truly value and where the smart money is going.
The consensus is that when the market shifts, opportunities don’t disappear. Already, there are indications that investors are repositioning for a rebound.
Theory through the lens of auction
Saville notes that during turbulent times, investors want inflation hedges in their baskets in the form of physical assets, commodities, precious metals or real estate: ”You want to be cautious about bonds and watchful of equities that are vulnerable to cost push inflation. Historical evidence is that real assets are the big winners. When it comes to property, you get the double whammy of the real cost of debt falling because you took the debt historically, that debt is being written down by inflation; and then on the upside the price of the asset is keeping pace with inflation,” he says.
His economic outlook for the domestic economy for the rest of 2025 is on balance positive: “We can look forward to ongoing low single-digit inflation at the bottom of the 3% to 6% tunnel. And I take particular confidence from the South African Reserve Bank’s ambition to go for a 3% inflation target. This is very good news for investors, for inflation, for the Rand and for certain asset classes, including real estate,” he says.
Dart says what High Street is seeing ‘on-the-ground’ reflects not only the pressure highlighted by Saville but the stirrings of positivity.
“Looking through the lens of auction, we are seeing that economic pressure. We are seeing uptick in distressed sales across non-core nodes and underperforming sectors such as office parks or hospitality stock. Liquidators, banks and business rescue practitioners are reaching out to us for a solution when it comes to unlocking cash in a high default environment at the moment.”
When it comes to small- to medium-sized enterprises, Dart reports an increase in owner/occupier selloffs. Sluggish consumer demand coupled with input cost pressures is prompting many owner/occupiers to offload properties to raise capital and reduce their exposure to debt. The same applies in heavy manufacturing zones which mirrors the ongoing contraction of South Africa’s manufacturing sector, he points out.
That being said, he also notes that he is seeing pockets of confidence. He describes the auction space as price sensitive, and yield driven at present. “The asset classes that people are chasing reflect a need for income stability in locations that are future proof: “On the floor, we’re certainly seeing cautious bidding and there’s definitely evaluation sensitivity. But there are buyers on the floor and deals are being done. We are also seeing confidence return, especially if the potential earnings and other fundamentals justify the price. Maybe this is a sign of an early recovery in the economic cycle,” he says.
Auction as the new normal
High Street is also seeing auctions becoming a preferred route to market.
“Sellers and buyers are choosing auctions either as primary sales strategies or implicit parts of their investment strategies. Repeat sellers are coming to the floor and a number of sellers have come to us for repeat mandates. There’s institutional confidence in auctions. This is a great price discovery tool in these uncertain times. There’s a lot of selectively confident buyers in the marketplace, and they’re adjusting to a new price reality at the moment,” Dart continues.
At present, Dart says there is most activity from the Western Cape, with demand outstripping supply of all three major commercial (Retail, Industrial, and Office) property segments. Gauteng is at the other end of the spectrum with all three segments seeing an oversupply. Dart also notes that demand is beginning to exceed supply in all of these segments in KwaZulu-Natal, pointing to some “green shoots” of growth in the region.
Asset classes that appeal to discerning investors include industrial (which has been High Street’s bread and butter for the last two years), well located commercial mixed-use developments where there are opportunities for redevelopment or conversion, and local convenience retail (neighbourhood centres). Given the demand for these types of properties, High Street Auction has some great assets on the floor this month, including industrial properties in Meadowdale and Wadeville, and local convenience retail centres in Butterworth and Pinetown, amongst others.
“However, as soon as buildings have vacancies or any rezoning dependencies, you’ll find interest cooling on those commercial, mixed use type assets. Your larger malls, enclosed malls, centres with low foot areas continue to face headwinds. Larger corporate head offices are being avoided. This segment continues to be over supplied and doesn’t enjoy a great deal of demand.”
Most importantly, Dart continues, those that are watching auctions closely are most likely to spot value ahead of the curve: “I’m also finding a lot of buyers are using auctions to map pricing trends in real time. They see where the market is at any given time and can benchmark. I’m finding that auctions are becoming intel hubs.”
Ends.
