Mortgage stress – which refers to properties that are two months in arrears on bond repayments – will increase in the second quarter of the year, auctioneers the Alliance Group said on Tuesday.

The group is due to release its second quarter Distressed Asset Index at the end of June and has projected that mortgage stress will shoot up from 125 000 home owners in the first quarter to close to 200 000 home owners in the second quarter.

The group also projected that severe mortgage stress – four months in arrears on bond repayments – would rise sharply from 55 000 home owners in the first quarter to 85 000 in the second quarter.

"There is a flood of residential stock being brought to the auction floor by both forced and non-forced sellers.

"Banks tightening up on new financing is creating a double whammy for the market," said Alliance Group CEO Rael Levitt.

He said there was distress "across the board" and it had not shown signs of slowing down any time soon.

He said the market was also close to seeing "jumbo mortgage distress" in luxury suburbs as well as developments and golf estates, with some growing distress in the commercial property market.

"The Alliance Distressed Asset Index indicates that the residential property market is in the third quarter of a technical recession and that repossession, insolvencies and distressed property in the luxury market jumped in the first quarter of 2009," Levitt said.

The Distressed Asset Index also indicated that 80 percent of bondholders who were in severe mortgage stress would in all likelihood have to sell or lose their homes, he said.

Consequently, Alliance Group had started a programme new to South Africa in which estate agents could earn commission by bringing buyers to auctions.

"Real estate agents and auctioneers will combine forces to assist struggling home owners to sell their properties successfully," Levitt said.

Through the Broker Participation Programme, Alliance Group would allow all brokers and estate agents to introduce their buyers to properties which were being brought to the auction floor through the various residential property recovery programmes, Levitt said.

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