2014-12-12

Mortgagee Listings See the Surfacing of Shoebox Apartments and a Strong Feature on Non-landed Homes in Prime Residential Enclaves

The Singapore property auction market through 2014 saw a total of 529 properties being put up for sale; of which 159 (30.1 per cent) were put up by mortgagees. Not only is this 5 times the 32 properties put up by mortgagees in 2013, it is also the highest number in 5 years since 2010. Meanwhile, the proportion of properties put up by owners in 2014 remains high at close to 69.9 per cent.

Ms Annie Chan (陈丽娟), Director | Auction & Sales at Colliers International says, “The higher number of mortgagee listings this year was on the back of the stricter regulatory and financing environment, in which borrowers in default are finding it challenging to sell their properties on their own, as buyers generally remain cautious.

In addition to buyers having to fork out a higher cash outlay with measures such as Additional Buyers’ Stamp Duty and Total Debt Servicing Ratio in place, there are also concerns of a mounting supply of residential units  and an impending increase in interest rates. The high number of bankruptcies  could have also contributed to the increase in the number of properties put up for mortgagee sale.”

Ms Chan continues, “However, there is little cause for anxiety, as the 159 properties put up by mortgagees this year are still fewer than the mortgagee listings during the 2008 global financial crisis, the 1998 Asian financial crisis, as well as the last market downturn in 2004.”

Of the 159 properties put up for mortgagee sale, 123 (77.4 per cent) were residential homes.  This represents a seven-fold jump from the 17 residential properties listed by mortgagees in 2013.   

Non-landed residential properties make up a major 65.4 per cent of the mortgagee listings. 

In particular, apartments/condominiums in prominent residential enclaves were featured strongly in this year’s mortgagee listings.

There were 51 non-landed homes in prime areas put up for sale by mortgagees – including units at the newer prime Districts 1 and 4 which comprises developments such as Marina Bay Residences, The Sail @ Marina Bay, Reflections at Keppel Bay and Turquoise in Sentosa Cove; as well as at the traditional prime Districts 9 and 10 which comprises developments such as Thong Sia Building (Orchard Road), The Verv (River Valley), Residences at Killiney (off Orchard Road), Orchard Scotts (Orchard Road), Estilo (Dhoby Ghaut), Visioncrest Residence (off Orchard Road), Botanic Gardens Mansions (Napier Road) and Stevens Court (Stevens Road).   

Ms Chan comments, “The subdued market sentiments are pronounced in these areas, as housing demand from both locals and foreigners has substantially weakened.  Not only has it become challenging for local homebuyers to secure loans, particularly for higher-priced properties, due to the stringent loan curbs, the falling yields as a result of the softer rental market have also deterred investors from committing to a purchase.

Meanwhile, buying interest from foreigners, who traditionally form a significant demand base for such properties, has declined substantially, as they now have to pay a hefty total buyer’s tax of 18 per cent for their property acquisitions.”

A fair share of 53 mass-market apartments/condominiums in the sub-urban area was also put up for sale by mortgagees.  Examples include units at The Medley (Telok Kurau), West Bay Condominium (West Coast), Ris Grandeur (Pasir Ris) and Haig Court (Haig Road).

One notable trend at property auctions this year was the surfacing of shoebox apartments  in the mortgagee listings, reflecting the widespread effects of the cooling measures and tightened credit rules. Nine shoebox units were put up for mortgagee sale in 2014, as compared to none in the past four years.

Located at various locations such as Geylang, Haig Road, Woodlands and Wilkie (Dhoby Ghaut), these shoebox units are generally priced below S$1 million.

Ms Chan says, “Besides singles and couples with no kids, investors are also drawn to shoebox apartments due to their relatively-affordable price quantum.  However, investors who are servicing more than one loan may have felt the heat from the increasingly-competitive leasing market.  As such, those who are unable to secure tenants or have been hard-pressed to accept lower rents may find it a stretch to service their mortgage.  This may then result in default in their monthly mortgage payments.”  

Landed homes contributed 11.9 per cent to the mortgagee sale listings. Most of these properties have sizeable land plots of about 4,000 sq ft or more and borrowers are experiencing difficulties in disposing their properties due to the higher price tags that come with these larger landed homes.

Notwithstanding, the lower percentage of landed homes put up for mortgagee sale is due to the ownership profile of such homes – comprising mainly owner-occupiers, since landed residential properties are still coveted homes due to its scarcity. 

Sales at Auctions

Of the total 529 properties that were being put up for sale this year, 32 properties were sold, garnering a total sale value of S$72.5 million. 

Residential properties accounted for more than half of the properties sold at auctions; most of which are apartments/condominiums.

Notable apartments/condominiums included units at Draycott 8 (Stevens Road), Orchard Scotts (off Scotts Road) and Ocean Park (East Coast) that were sold at S$5 million, S$3.3 million and SS$2.34 million, respectively.

Only three landed properties were sold – Brighton Crescent that was knocked down at S$9.1 million, Eng Kong Drive at S$3 million and Wolskel Road at SS$4.31 million.

Office properties contributed 14.8 per cent of the total sale value, with the sale of four adjoining office units at Orchard Shopping Centre at S$8.55 million and an office unit at Fook Hai Building at S$2.2 million.

Retail properties constituted 13.9 per cent of the total sales.  They included a conservation shophouse at Jalan Besar at S$5.2 million and a HDB shophouse at Bukit Batok at S$680,000. 

Meanwhile, examples of industrial properties sold included strata factories located at Enterprise Hub in Jurong (S$1.21 mllion), Vertex in Ubi (S$1.55 million) and Oxley Bizhub in Ubi (S$1 million).

Other sales that made up 4.8 per cent of the total sale value include a petrol station at Tuas that was knocked down at S$3.42 million.

Outlook

Looking forward, the number of properties put up for mortgagee sale – particularly those of apartment/condominiums – is expected to increase, as sellers continue to face increasing difficulties in disposing their properties in the resale market.  The challenging market conditions will also result in an increasing number of high-value properties in prime districts 1, 4, 9 and 10 being put up for mortgagee sale.

Ms Chan comments, “Unless the government curbs on the property market are relaxed, it is expected that the number of properties put up for mortgagee sale will continue to trend upwards to hit 200 in 2015.
Residential properties will still make up the lion’s share of mortgagee listings next year, at about 70-80 per cent of the total mortgagee sale.  This is on the back of some 78,402 private residential properties expected to be completed by 2018; of which, a significant 26.6 per cent, or 20,824 units will be completed next year. Owners who are holding multiple properties may experience further cash crunch – in view of the impending increase in interest rates and the challenge of renting out their units as more supply comes on to the market.”

She concludes, “On the back of the continued effects of the government regulations, the expected low number of high-value sales and buyers’ opportunistic stance, the total sale value for the Singapore auction market in 2015 is likely to come in at approximately S$70-80 million.”

Note: All figures in the press release are accurate as of 12 December 2014.