2013-06-28

The Result of Government Curbs and Turbulence in the Stock Market During the Quarter

The Singapore property auction market was relatively quiet in 2Q 2013, with both sale volume and value paling in comparison to that recorded in 1Q 2013.  

Only 4 properties were sold in 2Q 2013.  They included: 

  • A 2-storey terrace house at Woo Mon Chew Road (East Coast) sold for S$2.85 million
  • A HDB shophouse at Toa Payoh sold for S$2.568 million
  • An apartment in Novena Court (Jalan Barat) sold for S$1.2 million 
  • A shop at High Street Centre (North Bridge Road) sold for S$430,000
The total sale value of S$7.05 million in 2Q 2013 reflected a 91.6 per cent plummet from the S$83.44 million recorded in 1Q 2013.  

Ms Grace Ng (黄黎明), Deputy Managing Director of Colliers International, says, “The subdued property auction market in the second quarter is a clearer reflection of the impact of the continuous government curbs in the residential sector, with the last wave of cooling measures implemented in January1.  

Performance in the secondary market became lacklustre during the quarter, when buying demand was diverted to the primary sales market.  Buyers were attracted to various sweeteners2 offered by developers to cushion the impact of the Additional Buyers’ Stamp Duty (ABSD).” 

Ms Ng continues, “Subdued market activity was further perpetuated by the persistent stalemate between buyers and sellers.  While owners are holding on to their property, waiting for an offer that meets their price expectation, home buyers who now have to fork out larger cash outlay – due to the increase in ABSD, higher cash down payment and lower loan-to-value ratios – may take a more discretionary view of home buying.

Coupled with the threat of a possible increase in interest rates, some buyers have also adopted a wait-and-see attitude in anticipation of a possible price fall.” 

Additionally, buying sentiments was also affected by the stock market sell down across the May-to-June period, exacerbated by fears that the United States central bank would start to cut back on monetary stimulus amid ongoing uncertainties in the global economy.

Together with concerns on the significant supply of residential units in the pipeline – with some 110,000 public home units and 90,000 private home units including executive condominiums slated for completion by 2016, buying interest in the private residential market could also be impacted. 

Nevertheless, the total sale value in 1H 2013 tallied to S$90.49 million – contributed mainly by the sale of 5 high-value properties3 in 1Q 2013 which raked in a whopping S$77.46 million.  

The total sale value in 1H 2013 is 164 per cent higher than the S$34.3 million chalked up in 1H 2012 and it surpassed the S$62.44 million amassed for the whole of 2012.  

Number of Properties Being Put Up for Sale by Auction

A total of 243 properties were put up for auction sale in 1H 2013; of which, 16 were mortgagee sale (6.6 per cent), while the remaining 227 were owners’ sale (93.4 per cent).  

The proportion of mortgagee sales has remained low at less than 10 per cent since 2011, pointing to strong underlying fundamentals of the local economy – high employment rate, healthy property market and firm rental market amid the supportive low interest rate environment.  

Sectoral Performance

The industrial and residential sectors contributed a fairly equal proportion of sales in 1H 2013, accounting for 30.8 per cent and 32.1 per cent of total auction sales, respectively.  The sale of 5 retail properties contributed to 29 per cent of the total sale value, while the sale of a petrol station contributed to the remaining 8.1 per cent. 

Outlook

Ms Ng comments, “Going forward, in light of stable economic growth in Singapore, the number of mortgagee sales is expected to continue to remain low – not exceeding 10 mortgagee sales every quarter.  On the other hand, owners’ sales are likely to remain high, accounting for about 90% of the properties put up for auction sale.”  

Landed residential properties will continue to be popular with many Singaporeans – given the penchant for owning a landed property in land scarce Singapore. 

On the other hand, investors will continue to look for well-located and affordable commercial and industrial properties that are in the region of S$1 million.  Such properties are attractive and in demand as they are capable of accruing good yields of between three and five per cent.

Ms Ng concludes, “Given that interest rates are expected to be relatively low and the stock market stabilising towards the second half of 2013, the stalemate situation between the sellers and buyers is expected to improve, with buyers returning to the market.  They are likely to continue to look out for value buys in the landed sector and the secondary market, where the availability of relative larger apartments and condominiums offer better value for money, compared to new condominiums in the primary market.

Auction sales volume is, therefore, expected to pick up in 2H 2013.  Overall, auction activities for 2013 are projected to generate a total sales value of more than S$120 million.” 

Notes: 

  1. 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 (ABSD) 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. 

  2. Sweeteners offered by the developers include partial absorption of the ABSD, early bird discounts and other discount schemes. 

  3. High-value properties are defined as those worth more than S$5 million each.