2014-06-26

A Reflection of Tepid Activity Level in the Resale Market 

The Singapore property auction market saw a total of 256 properties being put up for auction sale in 1H 2014.  Of these, 192 properties were put up by owners, while the remaining 64 properties were listed by mortgagees. 

It is observed that the number and the proportion of properties put up for mortgagee sale has been on an uptrend since 2012. 

The increase in the number of mortgagee listings could be attributed to the tepid activity level in the residential property resale market, which has been hit by the consecutive rounds of government cooling measures.  

Ms Grace Ng (黄黎明), Deputy Managing Director of Colliers International, says, “In addition to the punitive taxes and tightened loan rules that have resulted in a shrunken pool of potential buyers, buying interest has been further diluted by the diversion to new projects in the market.  For instance, the recent launch of Commonwealth Towers was met with healthy response due to its competitive pricing, while the downward re-adjustment of prices for Sky Habitat and The Panorama also led to an improvement in their sales figures.”

On the back of a slower secondary sales market, borrowers who default on their loans are finding it increasingly difficult to find a buyer on their own in the resale market.  This is especially so in recent years, as buyers are faced with the twin hurdles of Additional Buyer’s Stamp Duty  for their second and subsequent property purchases, and loan restrictions due to the Total Debt Servicing Ratio.  

The increase in the number of bankruptcies  could have also contributed to the rising number of properties put up for mortgagee sale. 

Ms Ng continues, “Nonetheless, the 64 mortgagee listings, which almost tripled the 24 properties listed during the market boom in 2012, is still much lower than the record high of 2,462 properties listed during the property market trough in 2004.   It is also just a fraction of the 452 and 270 mortgagee listings put up during the 1998 Asian Financial Crisis and the 2008 Global Financial Crisis, respectively.”   

Mortgagee Listings: Property Types 

In 1H 2014, approximately 62.5 per cent of the mortgagee listings were residential homes.  Of this, 14.1 per cent were landed homes, while the remaining 48.4 per cent were non-landed residential apartments. 

Notably, majority of the landed properties listed by mortgagees in 1H 2014 had large land areas, such as semi-detached houses with land areas of more than 4,000 sq ft.  The large land sizes translate to higher price tags of above S$4 million, which made it more challenging for the owners/borrowers to find a buyer in the resale market, as the TDSR has made it more difficult for potential buyers to secure loans. 

For the non-landed residential properties that were put up for sale by mortgagees, there was a relatively good mix of mass market apartments and pricier residential properties that were above S$2 million.  

The mass-market apartments were spread across various localities – including Trevista at Toa Payoh, Bluwaters at Jalan Loyang Besar and The Chuan at Lorong Chuan, while pricier residential apartments included units at Aalto along Meyer Road, Reflections @ Keppel Bay and Turquoise in Sentosa Cove.  

Owners are finding it challenging to dispose their pricier residential properties that are above S$2 million due to a lack of demand – following the enforcement of the ABSD, which saw foreigners having to pay a total buyer’s tax of 18 per cent for their property purchases.  The situation is especially pronounced in locations such as Sentosa Cove, Marina Bay area, as well as Districts 9 and 10.

Additionally, home buyers are bidding their time, in view of more options in the pipeline, which includes competing supply of some 33,555 non-landed residential units completing over the next 2 years.

17.2 per cent of the mortgagee listings were retail properties; of which, most of them were strata-titled retail shops in older complexes such as Golden Mile Complex and Orchard Plaza, and there was only one shophouse unit located at Belilios Lane.  

Strata-titled industrial properties also constituted to 17.2 per cent of the mortgagee listings in 1H 2014.  They included units at the WCEGA Tower and The Spire located in Bukit Batok, as well as the Entrepreneur Business Centre at Kaki Bukit.  In particular, buying demand for this segment has been affected by the Seller’s Stamp Duty imposed on industrial properties, as well as the run-up in prices in recent years. 

Properties Sold at Auctions

Of the 256 properties put up at auctions in 1H 2014, 15 properties were successfully sold, raking in a total of S$27.15 million.

 

Mortgagee Sale

Owner Sale

Total Sale

Period

Number sold

Value sold

($ million)

Number sold

Value sold

($ million)

Number sold

Value sold

($ million)

1H 2012

3

$4.32

7

$29.98

10

$34.30

2H 2012

7

$15.37

7

$12.77

14

$28.14

1H 2013

5

$7.66

7

$75.47

12

$83.13

2H 2013

5

$4.91

2

$3.60

7

$8.51

1H 2014

11

$13.84

4

$13.31

15

$27.15

Source: Colliers International Singapore Research 

Two high-value properties  were sold in 1H 2014 – 4 adjoining office units at Orchard Shopping Centre (Orchard Road) and a condominium apartment at Draycott 8 (Stevens Road) were auctioned off for S$8.55 million and S$5 million, respectively.  Apart from the two high-value sales, all other properties that were sold were affordably priced at S$2 million or below.  

Outlook

The trend of increasing mortgagee sales is expected to continue into the next two quarters. 

Ms Ng says, “Unless the government curbs on the property market are relaxed or removed, mortgagee sales – particularly for apartments and condominium units – are expected to increase, as sellers continue to face increasing difficulties in disposing their properties in the resale market.  

On the other hand, in light of the continued softening of residential home prices QoQ since 4Q 2013, buyers are expected to continue adopting a wait-and-see approach, committing only if they perceive a bargain.  Additionally, the impending interest rate increase, which is expected to set in as early as 2015, will also keep buyers on their toes.” 

Ms Ng concludes, “On the back of ongoing credit and budget constraints, properties that are priced around S$1.5 million and below will remain popular due to affordability concerns.  The sale value for the Singapore auction market is likely to come in at between S$60 million and S$70 million for the whole of 2014, falling some 24-35 per cent from 2013’s auction sales receipt.”