2012-06-27

Only two high value transactions worth more than S$5 million are achieved.

Following subdued activities in the property market after the imposition of the Additional Buyer’s Stamp Duty1 (ABSD) in December last year, the Singapore property auction market got off to a muted start in Year 2012.

A total of 198 properties were put up for auction sale in 1H 2012; of which 7 were listed by mortgagees and the remaining 191 were put up by owners.

This continues the trend of declining mortgagee listings since Year 2007, which reflects the improved financial position of mortgagors on the back of the continued low interest rate and high liquidity environment, as well as a healthy rental market.

Of the 198 properties that were put up for sale at auctions in 1H 2012, 10 were sold, fetching a total sale value of S$34.3 million.

This marks the second lowest sales value garnered, since the onset of the global financial crisis in Year 2008; and is a distinct 50.5 per cent below the S$69.25 million amassed from the successful auction of 33 properties in 1H 2011.

The total sale value is, however, 30.1 per cent higher than the S$26.37 million achieved in 2H 2011 from the sale of 13 properties.

Ms Grace Ng (黄黎明), Deputy Managing Director at Colliers International, says, “While there is a substantial 30.1 per cent increase in the total sale value in 1H 2012, it is largely attributed to the sale of a petrol station along Jalan Ahmad Ibrahim, which was sold for S$12.73 million.

Apart from the sale of the petrol station, the other high value transaction was a JTC factory at Loyang Way, which was sold for S$7.1 million. These two properties contributed to 57.8 per cent of the total auction sales during the first half of this year.”

The other eight properties that were auctioned off during the review period were mainly small- to mid-sized transactions – including three residential properties worth a total of S$7.19 million, three retail properties worth S$5.28 million and two factories worth S$2 million.

Secondary market activity in the residential sector evidently thinned in 1H 2012, as buyers and sellers adopted a wait-and-see attitude, while mulling over the implications of the newly implemented ABSD in December 2011.

The residential sector made up 21 per cent of the total auction sales in 1H 2012, with three residential transactions worth S$7.19 million. This is a 37.9 per cent decline from the S$11.57 million garnered from six transactions in 2H 2011.

The three residential properties that were sold under the hammer in 1H 2012 were a semi-detached house at Kelulut Hill in the Seletar area which was sold for S$2.66 million, a terrace house on Thomson Road which was sold for S$2.21 million and an apartment at Botanic Gardens View in prime district 10 that was sold for S$2.32 million.

Of these three transactions, two were landed properties; which reflected the appeal of such properties in land-scarce Singapore to buyers who are always on the lookout for attractive buys.

Meanwhile, non-residential properties constituted 79 per cent of all auction sales in 1H 2012.

Strong demand was seen for industrial properties during the review period – three industrial properties were sold for a total of S$9.1 million. They included a JTC factory at Loyang Way which was sold for S$7.1 million, a terrace factory at Tradehub21 located at Boon Lay Way for S$1.5 million and a flatted factory at Woodlands Link for S$500,000.

In the absence of stringent regulatory curbs, commercial properties, such as strata-titled shop units and shophouses, continued to attract investors due to the higher yields of between four and six per cent, as compared to only two and three per cent from residential properties.

Two strata-titled shops at Fortune Centre (Middle Road) and People’s Park Centre (Chinatown) were sold for S$450,000 and S$730,000, respectively. Additionally, two adjoining Housing Development Board shophouses at Marine Parade Central were sold for S$4.1 million.

Ms Ng says, “Looking forward, in light of the sustained high liquidity and low interest rate environment, the low level of mortgagee sale is expected to continue into the second half of 2012. However, the market could potentially see some high-end residential properties surfacing as mortgagee sale. This is owing to the implementation of ABSD, which resulted in the subdued level of market activities in the high-end residential sector. Property owners who have difficulties in keeping up with their mortgage loans and disposing their properties in the open market, could then be forced to give up such properties.

Driven by the current exuberance of launches of private residential properties in the mass market, the property auction market in 2H 2012 may see a pick-up in residential sales – the result of a spillover in the buoyant buying interest. Astute buyers are expected to look for value buys in the resale market, amid new residential projects in suburban areas achieving record-breaking prices.”

The absence of anti-speculative measures in the commercial and industrial sectors, coupled with the relatively-higher yields commanded by these properties, will continue to attract buyers’ interest in these segments.

Ms Ng concludes, “Auction activities in 2H 2012 are projected to turn in more than S$30 million worth of sales transactions.

In general, on the back of a subdued secondary market and the absence of high value sales in the residential sector, as well as a reduction in the number of mortgagee sale, the sales forecast for the auction market in Year 2012 will be, on average, some 27 per cent lower than last year.

The year could possibly end with approximately S$70 million worth of auction transactions, with commercial and industrial properties continuing to take the lead.”

Notes:
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.

Additional Buyers Stamp Duty (ABSD) is payable for all Contracts/Agreement dated on or after 8 Dec 2011 for certain buyers of residential properties on top of the existing buyer’s stamp duty (BSD). Foreigners and non-individuals have to pay 10% as ABSD. Singapore PRs who already own one or more residential properties pay 3% as ABSD. Singapore Citizens who already own 2 or more residential properties pay 3% as ABSD.