2015-03-26

Centrally-located Residential Apartments and Shophouses Are Popular Among Buyers

The Singapore property auction market started the year on a positive note – with 10 properties sold, generating a total transaction value of S$34.28 million.  This is double the S$13.71 million garnered in 4Q 2014 and almost twice the S$17.9 million in the corresponding quarter in 2014.

Of the 10 properties sold this quarter, there was only one owner sale – a row of five adjoining shophouses, while the remaining 9 properties put up by mortgagees comprised 1 factory unit and 8 residential homes.

The row of five adjoining shophouses is located at Teck Chye Terrace (off Upper Serangoon Road) and was sold for S$14.63 million – the only high value  sale during the quarter.

Ms Grace Ng (黄黎明), Deputy Managing Director of Colliers International, says, “Shophouses continue to be highly sought after by investors due to their scarcity. Meanwhile, there is an increasing number of homes, particularly high-end properties, being transacted at 20-30 per cent below the peak prices in 2007/2008.  Hence, we are seeing opportunistic buyers who are quick to take advantage of the drop in prices to snap up well-located apartments in the prime areas.”

There were five apartments located in the central region that were sold – two of which include an apartment in Pearl Bank (Outram) and Twin Regency (Kim Tian Road) located in District 3 that were hammered at S$1.35 million and S$2.3 million, respectively. The other three were an apartment at Ville Royale (River Valley) sold for S$1.83 million, a unit at The Grange (Grange Road) sold for S$4.15 million and one in Estilo (Wilkie Road) sold for S$800,000. 

Meanwhile, one apartment from Amber Residences (East Coast), also a popular residential district, was sold for S$2.7 million.

Landed properties continue to be popular with owner-occupiers.  Located at Eng Kong Drive (Upper Bukit Timah), an intermediate terrace and a corner house were sold for S$2.42 million and S$3.3 million, respectively. 

The last mortgagee sale was a factory unit at Empire Techno Centre (Kaki Bukit Road), which was knocked down at S$800,000.

Properties Put Up at Auction 

A total of 187 properties were put up for sale by auction in 1Q 2015.  Of these, 56 were put up by mortgagee, while the remaining 131 were put up by owners.

The number of properties put up by mortgagee this quarter increased 19 per cent quarter-on-quarter (QoQ), and comparing to the corresponding quarter last year, it is 2.5 times the 22 properties put up in 1Q 2014. 

Residential properties have generally contributed to the lion’s share of the mortgagee listings – at 82.1 per cent of the mortgagee listings this quarter. 

Home owners who faced difficulties in servicing their mortgages found it challenging to dispose their units in the secondary market due to the ongoing cooling measures, loan curbs, increasing interest rates and the mounting supply of residential units, among others.

Sales activity continues to be languid, as stringent regulatory measures such as the Additional Buyers’ Stamp Duty and Total Debt Servicing Ratio continue to act as effective deterrents.

Ms Ng comments, “Homebuyers have also adopted a cautious stance, in light of climbing interest rates. The Singapore Interbank Offered Rate (SIBOR), to which the mortgage rates are pegged to and which have already risen considerably, are expected to climb higher – in tandem with the widely-anticipated United States Federal Reserve’s raising of interest rates this year.  This would further dent affordability.”

She adds, “There is still a stalemate between buyers and sellers.  Buyers generally now expect a discount of 10 per cent or more off the current open market value due to increased SIBOR and impending interest rate hike, to buffer themselves against the increasing monthly mortgage rate and falling property prices.  However, sellers are generally not giving way too, as they have strong holding power – especially if they have bought their properties before the run up in prices in the last couple of years.  Plus, employment rate remained high; thus, enabling home owners to service their monthly mortgage.”

While buyers stay away due to affordability concerns, buying interest has also diverted to other countries, such as Malaysia and Australia – given the relatively lower acquisition costs in these markets.  At the same time, in view of the dampening effect of the estimated 21,359 private residential homes slated for completion in 2015, an all-time high supply of homes since 1995, homebuyers have kept to the side lines.

She adds, “Moreover, with more choices in the market competing for a smaller pool of tenants due to slower expatriate inflows and higher home vacancies, it is more challenging for landlords to secure good rents or even find tenants in a softer rental market; thereby, affecting homeowners’ ability to service their monthly mortgages.”

Properties put up by owners remain the bulk of the property listings for auction, at 70.1 per cent of the total listings in 1Q 2015. 

Owing to the quiet secondary market, many owners turned to auction to dispose properties due to the higher level of response typically garnered by prominent auction advertisements.

The overwhelming turnouts at auction sessions are a testament to the effectiveness of using auction as a mode of sale to reach out to a wider pool of potential buyers. Attendance at the monthly auctions conducted by various property auction houses in Singapore have more than doubled to 150-200, compared to 1Q 2014.

While genuine buyers and market watchers scout for properties at auctions, potential homebuyers are hopeful to tap on opportunities, as owners and mortgagees are genuine sellers with realistic asking prices.

Outlook    

On the back of rising interest rates which will result in the increase of SIBOR, and ultimately impacting the ability of homeowners and investors to service their loans, it is expected that the uptrend in mortgagee sales will continue.

Residential properties, especially non-landed homes, are likely to form the bulk of mortgagee sales – in view of the upcoming project completions.

Ms Ng comments, “These homes which have just obtained the Temporary Occupation Permit may be put up for auction, as investors take on a heavier financial burden upon the property’s completion, under the standard progressive payment scheme adopted for the purchase of homes under construction.

Additionally, there could be a higher number of large apartments of more than 1,500 sq ft, especially those in central/prime locations, that will be put up as mortgagee sales, as such properties are more challenging to dispose due to the higher price quantum.  The pool of buyers has shrunk amid challenging market conditions and the fall in the number of foreign buyers.”

Mortgagee sales of landed properties will continue to be low and mostly limited only to the larger ones with a large land area of more than 4,000 sq ft, which has a higher price quantum and located in the sub-urban parts of Singapore. 

Industrial properties worth approximately S$1 million will continue to appeal to end users.

Owner sale will continue to be significantly high at more than 60 per cent of all properties put up for auction sale this year.

Overall, interest in auctions is expected to remain high, as buyers continue to closely watch the market to seek out opportunities.  Given that buyers are expected to stay on the sidelines and commit only if they perceive a real bargain, the total sale value is not expected to spike in the next few quarter.

Ms Ng concludes, “The total sale value for the Singapore property auction market is expected to come in at S$50-55 million for 1H 2015, an increase of some 10-21 per cent from the total sales value in 2H 2014.”

Note:

  • Numbers are current as of 26 March 2015.