Lightstone Property has highlighted the worrying number of negative sales in South Africa, where houses are sold for less than their purchase price.
According to the company's May 2024 Property Newsletter, many properties, particularly those purchased a decade ago, are selling at significantly reduced prices.
During the peak of the global economic crisis, Sales in Execution (SIEs) or foreclosures were prevalent in South Africa.
Currently, while the number of SIEs is declining, negative sales are becoming more common.
A decrease in SIEs could be seen as a positive sign for the property market and the economy overall.
However, Lightstone's analysis of SIE trends alongside the decline in property sales over the past 24 years suggests a troubling increase in distressed sales.
The firm noted that properties are often selling for much less than expected, sometimes even below their original purchase price.
Examining SIEs, negative sales, and negative value growth sales together offers a clearer picture of market distress, especially for properties bought 10 years ago, which are often not achieving anticipated value growth, the report stated.
Lightstone's data shows that lower-value Freehold properties are suffering more than higher-value properties and estates, although no segment is completely unaffected.
Sectional titles have also been notably impacted by negative sales.
In 2023, Gauteng saw the highest rate of negative sales, with 9 out of every 100 sales falling into this category.
Mpumalanga and KwaZulu-Natal followed with around 6.5 negative sales per 100.
In contrast, the Western Cape had a lower rate, with five negative sales per 100, nearly half of Gauteng's rate.
Although the reduction in foreclosures might seem encouraging, the rise in distressed sales indicates significant pressure on the property market, Lightstone said.
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