2011-08-29

Singapore

A total of 34 properties were being put up for auction sale during the lunar seventh month this year; and only one property was sold for S$1.66 million.

A total of 34 properties were being put up for auction sale during the lunar seventh month this year; and only one property was sold for S$1.66 million.  This is comparable to the Hungry Ghost Festival in 1998, the year of the Asian Financial Crisis, during which a total of 29 properties were being put up for auction sale; and two properties were sold for S$1.65 million.

Ms Grace Ng (黄黎明), Deputy Managing Director of Colliers International, says, “The Hungry Ghost Festival this year sees the second lowest number of properties put up for sale in 14 years; the lowest was in 1998.  Nonetheless, this is mainly due to the current market conditions and buyers’ sentiment, instead of the superstition associated with the Hungry Ghost Festival. 

The lull in the residential market, as a result of the government measures1 introduced since January this year, has impacted the auction property market and reduced the number of residential properties put up for auction sale.” 

Ms Ng adds, “It was observed that some owners have temporarily halted their plans of putting their residential properties for sale in the market now, as buyers are waiting on the sideline, in the hope of securing a better bargain. 

Instead, many owners prefer to now rent out their properties to generate a better yield, as compared to depositing the money in the bank which earns them a paltry interest of less than one per cent per annum.  Additionally, properties are usually viewed as a good hedge against inflation.”  

32 out of the 34 properties put up for sale during the Hungry Ghost Festival this year were owners’ sale – further reflecting that the property owners are not deterred by traditional taboos such as the lunar seventh month, but recognise auctions as a good mode of sale due to its transparency and a wider reach to buyers.

The mere two properties that were put up for auction sale by mortgagee implied that the low interest rates and the good rental market have enabled property owners to service their monthly repayments or dispose their properties in the open market at favourable prices, given that prices have risen significantly in the past one year.

The single property that was sold during the Hungry Ghost Festival this year was a terrace house at Da Silva Lane (Serangoon), which was sold for S$1.66 million.

Ms Ng comments, “Due to the global stock market correction this month, on top of the recent Europe debt crisis, and US debt rating downgrade, the commercial and industrial sectors that were the star performers this year were seemingly affected this month.  This is because sellers have held back from putting their properties up for sale, while most buyers and investors have now adopted a ‘wait-and-see’ attitude.”  

By far, the total sale value achieved at auctions this year has reached S$80.354 million, which is a third of S$223.9 million achieved last year.  It is expected that the total sale value for the entire year would exceed S$110 million. 

Ms Ng concludes, “Property buyers are holding back now, as they are worried about a double-dip recession.  Meanwhile, on the other side of the scale, sellers are unlikely to make significant adjustments to their asking prices, as they have a stronger holding power due to the low interest rates, which are expected to remain low for the next two years.   Consequently, the number of mortgagee sale is unlikely to increase significantly.

Nonetheless, when the market conditions improve and the market is more stable, owner occupiers and investors are expected to continue to buy property due to the long-term capital appreciation and stable returns.” 

Commercial and industrial properties would continue to be a favourite with property investors, as these two asset classes have a stable return of four to seven per cent, on top of the duo advantages of a higher loan-to-value ratio and the exemption of sellers’ stamp duty. 

Meanwhile, given that the luxury residential sector is slowing down, the sale of high-end properties this year is unlikely to be as buoyant as 2010, which saw a total sale value of S$57.44 million contributed by the sale of four Good Class Bungalows.  Nonetheless, sale of other landed properties such as terrace houses or smaller detached houses, among others, is expected to still remain popular due to buyers’ desire to own landed properties in land-scarce Singapore. 

Note:

1.    The cooling measures on January 14, 2011 included increasing the holding period for imposition of Seller’s Stamp Duty (SSD) from three to four years, and raising the SSD rates of residential properties bought on or after January 14, 2011 and sold in the first, second, third and fourth year of purchase, to 16%, 12%, 8% and 4% of consideration, respectively.

In addition, the Loan-To-Value (LTV) limit was lowered to 50% on housing loans granted by financial institutions regulated by the Monetary Authority of Singapore for property purchasers who are not individuals, and from 70% to 60% for individuals with one or more outstanding housing loans at the time of the new housing purchase.