2013-03-28

Strong Performance in 1Q 2013 was Powered by the Sale of Four High-value Properties

The Singapore property auction market witnessed a strong start to 2013, garnering a total sale value of S$76.08 million1 in 1Q 2013.  This is despite the lull in the secondary market – a result of the recent series of government cooling measures implemented in the residential sector2

The sale value signifies a heartening turnaround from last year, which exceeds the S$62.44 million chalked up in the entire year of 2012 by 21.8 per cent. 

The improved performance in 1Q 2013 was due to the sale of four high-value properties3, which generated a total sale value of S$70.1 million.  This contributed to a whopping 92.1 per cent of the total sale value in 1Q 2013. 

Ms Grace Ng (黄黎明), Deputy Managing Director at Colliers International, says, “Properties such as the the Good Class Bungalow (GCB)at 8 Chee Hoon Avenue (off Dunearn Road) and the JTC factory at 39 Benoi Road (Jurong) are highly sought after, as they are rarely made available for sale due to their scarcity.

For instance, the GCB at Chee Hoon Avenue, which is located close to Botanic Gardens MRT station, is very popular with both investors and end users, while the JTC factory at Benoi Road, which has a large land area of more than 300,000 sq ft and is located near Joo Koon MRT station, strongly appeals to end users.”   

The renewed interest seen in the auction market could be attributed to the continued government curbs in the residential sector, which has diverted buying interest to the non-residential sectors.  

Ms Ng continues, “In particular, shophouses are a main draw to investors, as such property types are not affected by the punitive measures, such as the Additional Buyer’s Stamp Duty or Seller’s Stamp Duty, among others.  Additionally, given that shophouses typically generate yields in the region of 2-4 per cent per annum, investors who are on the lookout for alternative investments to bank deposits which offer an average paltry interest rate of less than 1 per cent per annum, would find shophouses a more appealing proposition.” 

Mortgagee Sale versus Owners’ Sale

A total of 113 properties were put up for sale in 1Q 2013, of which 10 were listed by mortgagees and the remaining bulk of 103 properties were put up by owners.

3 of the 10 mortgagee sales were concluded for a total value of S$4.38 million.  They included an apartment at Maplewoods (Bukit Timah Road) which was sold for S$2.1 million, and 2 industrial units at The Spire (Bukit Batok) and Admiralty Industrial Park (Woodlands) which were sold for S$660,000 and S$1.62 million, respectively. 

Meanwhile, 5 properties put up by owners were sold, of which 4 were high-value property sales worth more than S$5 million. The remaining 1 property was a HDB shophouse located at Bedok that was knocked down at S$1.6 million. 

Ms Ng comments, “It is observed that property auctions are also gaining traction with owners who own high-value properties which are traditionally put up for sale via other modes such as a private treaty, tender or expression of interest.  The phenomenon could be attributed to the organised marketing campaign which is carried out in a transparent and targeted process, and the ability to reach out to a wider pool of potential buyers from the generated publicity. 

In fact, the successful sale of the four high-value properties via auction this quarter bears testimony to the use of auction as an effective mode of sale across all sectors.” 

Outlook

With the diversion of interest from the residential sector to the commercial and industrial sectors, vendors will take the opportunity to sell their properties through an auction to generate more publicity and to ensure that the sale price is maximised through competitive bidding.   

Hence, going forward, it is expected that more owners will put up more high-value properties – in particular, the commercial and industrial properties – for auction sale.

Ms Ng adds, “While the property auction market will continue to enjoy a healthy flow of transactions in landed residential, commercial and industrial properties, the number of residential apartments and condominiums transactions is expected to be low.  This is attributed to the continued stalemate in the secondary residential market between buyers and owners.”  

Buyers will continue to adopt a ‘wait-and-see’ attitude, hoping for downwards price adjustments, while owners are expected to hold on to their prices due to the current low interest rate environment and the general reluctance to dispose the property now – a result of the subsequent higher acquisition cost from the Additional Buyers’ Stamp Duty imposed by the Government.

Ms Ng concludes, “Overall, auction activities are projected to turn in more than S$150 million worth of sales transactions for the whole of 2013.”   

Notes:

  1. Figures exclude the sale of land put up by statutory boards through auction.
  2. The seventh round of property cooling measures and, by far, the most extensive since 2009 was introduced on 11 January 2013 to dampen investment demand in the red hot residential property sector.  The Additional Buyer’s Stamp Duty rates for purchase of residential properties were raised between five and seven percentage points.  Loan-to-value limits on housing loans granted by financial institutions were also lowered for individuals with at least one outstanding housing loan, as well as for non-individual borrowers such as companies.  In addition, the minimum cash downpayment for individuals applying for a second of subsequent home mortgages was raised from 10 per cent to 25 per cent.
  3. High-value properties are defined as those worth more than S$5 million each.