2013-03-27

More High-end Residential Properties and Shop Units in Older Complexes Are Put Up for Mortgagee Sale

The Singapore auction property market saw the number of properties put up for mortgagee sale increase to 22 in 1Q 2014.  This is a relatively high number of mortgagee listings registered for a quarter, considering that there were only an average of 8 mortgagee listings per quarter in 2013 and an average of 6 per quarter in 2012. 

A total of 132 properties were put up for sale via auction in 1Q 2014, an increase of 10 per cent from the 120 properties recorded in 4Q 2013.  

Out of these 132 properties, 110 were put up by owners; of which, many have adopted auction as a complementary mode of sale to indicate their serious intention to sell – on the back of a quiet secondary market. 

Highest Quarterly Number of Properties Put Up for Mortgagee Sale Since 4Q 2010

The remaining 22 properties put up for sale were mortgagee listings.  

Although the absolute number of mortgagee listings remained low, this is the highest quarterly number of mortgagee sales put up for auction since 4Q 2010. 

The increased number of mortgagee listings seen in 1Q 2014 could have been the result of a quieter secondary residential property market. 

Sales activities in the secondary residential market have been falling for three years since 2010.  There were only 7,680 private homes being transacted in the resale market in 2013, which are half the 15,676 units transacted in 2012 and 54.1% per cent lower than 16,736 units in 2011. 

Ms Grace Ng (黄黎明), Deputy Managing Director of Colliers International, says, “The pool of potential buyers in the resale market has shrunk, making it challenging for owners to dispose their properties in the secondary market when they default on their mortgage payments.  There is also reportedly an increase in the number of bankruptcies. 

This is a different situation from the period between 2011 and 2012 when the buoyant property market was further boosted by a low interest rate and high liquidity environment.  Borrowers who were in default of their loan payments could easily sell their properties in the open market on their own.” 

Ms Ng continues, “The challenge faced by owners is further exacerbated, as the smaller pool of potential buyers may still encounter difficulty in securing loans – especially for properties with higher price tags – as a result of the Total Debt Servicing Ratio (TDSR) implementation which has tightened mortgage loan requirements.”

The 22 properties put up for mortgagee sale were a good mix of different property types. 

The residential sector saw two semi-detached houses – one located at Chartwell Drive (Serangoon Gardens) and the other at Jalan Mahir (Upper Paya Lebar) – being put up for mortgagee sale in 1Q 2014; which is the same number put up by banks for the entire 2013. 

Notably, there were five high-end homes being put up as mortgagee sales in 1Q 2014, compared to six such properties for the entire 2013. 

Ms Ng comments, “Buying sentiments have been affected by the multiple rounds of market cooling measures and the impact is most felt in the high-end residential sector .  Foreigners, who traditionally formed a large demand base for high-end properties, bore the brunt of the Additional Buyers’ Stamp Duty, resulting in a substantial wane in buying interest. Consequently, owners are finding it increasingly demanding nowadays to find a buyer.”  

Investors who have turned their attention to non-residential properties, following governmental curbs on the residential sector, have also not been spared from the stringent loan requirements with the TDSR in place.  Those who have bought the properties at high prices in the last few years are also finding it difficult to find a buyer in the secondary market now.  

Particularly, it was observed that more shop units in older complexes, which are traditionally popular with investors, are being put up as mortgagee sale.  The quarter saw two units in Golden Mile Complex and one in Orchard Plaza put up by banks, compared to only one shop unit at High Street Centre seen for the entire 2013.  

The industrial sector which is also affected by the various governmental regulations, such as the Seller’s Stamp Duty , saw two properties at WCEGA Tower (Bukit Batok Crescent) being put up as mortgagee sales in 1Q 2014. 

Properties Sold at Auction 

Six properties were sold in 1Q 2014, generating a total sale value of S$17.87 million.  This was 76.5 per cent down from the S$76.08 million amassed in 1Q 2013. It should, however, be noted that the high value recorded in 1Q 2013 was due to the sale of four high-value  properties.   

Four of the properties sold were forced sale/mortgagee listings.  They included a shop unit at Golden Mile Complex at Beach Road, which was sold for S$550,000 and three residential units.  They are Wilkie Apartment (Dhoby Ghaut), The Anchorage (Alexandra Road) and Draycott 8 (Orchard Road), which were knocked down at S$1.46 million, S$1.1 million and S$5 million, respectively. 

The other properties sold were put up by owners. A strata-titled factory unit at Enterprise Hub located in Jurong was hammered down at S$1.21 million, while 4 adjoining office units at Orchard Shopping Centre in Somerset were collectively sold for S$8.55 million.  

Ms Ng comments, “Due to concerns about affordability brought on by financing curbs such as the TDSR, it was observed that properties with a price tag of less than S$1.5 million have generally been able to attract buyers.”

She adds, “The low level of transactions this quarter reiterated the persistent stalemate between buyers and sellers.  Although sellers are now more willing to negotiate in light of the softer market sentiments, it is a buyers’ market now – with many adopting a wait-and-see approach in anticipation of price declines on the back of supply pressures in the near future.  Hence, offers to purchase now are often opportunistic, as buyers will only choose to commit if they find an attractive bargain.”     

Outlook

Considering the current inertia in the property market, it is expected that the number of properties put up for mortgagee sale will continue to increase, particularly in the high-end residential and retail sectors. 

Ms Ng says, “Affordability will still be the main concern among buyers.  Buyers will continue to look for affordably-priced properties such as those below S$1.5 million. 

Although buyers are expected to remain cautious – in light of the impending interest rates increase and the potential upcoming supply , which will put pressure on prices – sales activity is expected to pick up over the next two quarters, as both buyers and sellers gradually adjust their expectations to work towards market equilibrium.”  

She concludes, “The total sale value for the Singapore auction property market is expected to come in at between S$70 million and S$80 million for the whole of 2014, a decrease of some 13-24 per cent from the total sales value in 2013.”