Singapore, December 17, 2015 – Leading global commercial real estate services firm, Colliers International Group Inc.’s (NASDAQ: CIGI; TSX: CIG) has said that the property auction market in Singapore in 2015 witnessed a seven-year high of mortgagee listings. It surged by 51.6 per cent to 241, while owner listings stood at 555, bringing total auction listings1
to a six-year high of 796. This was a significant 50.5 per cent jump from the total of 529 auction listings last year.
The increase in the number of repossessed property listings put up for auction by banks and financial institutions was due to the difficulties faced by borrowers in default to sell their properties.
Ms Grace Ng (黄黎明), Deputy Managing Director of Colliers International, says, “Prospective buyers have generally stayed cautious, on the back of the stringent regulatory and financing environment, where measures such as the Additional Buyers’ Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) remain in place. Some of them have also become opportunistic, after considering the impending pipeline supply of residential units2
, the continued rise in benchmark interest rates and the macro-economic uncertainties.
“At the same time, investors have been deterred by the challenging rental market, where competition has intensified with the substantial number of new residential properties nearing completion3
Ms Ng adds, “Although the number of mortgagee listings has increased to 241 in 2015, there is little cause for anxiety yet. It is still lower than the number of mortgagee listings recorded during the Asian and Global Financial Crises in 1998 and 2008, respectively, as well as the last market downturn in 2004.”
Mortgagee Listings by Sector
Residential properties contributed to the bulk of the mortgagee listings at 79.6 per cent; of which, landed properties took a share of 20.7 per cent, while non-landed properties accounted for the balance 58.9 per cent.
Notably, the number of landed residential mortgagee listings more than doubled from 19 last year to 50 in 2015; of which 26 have larger land areas of more than 3,000 sq ft.
They included semi-detached houses at Faber Walk (Clementi), Toh Avenue (Changi), Woodgrove Walk (Woodlands) and a corner terrace at Eng Kong Drive (Upper Bukit Timah), among others. A Good Class Bungalow (GCB) at Binjai Park (off Dunearn Road) – the first time in eight years that a GCB was put up for auction by the lender – and a detached house at One Tree Hill (off Grange Road) were also put up for mortgagee sale during the year.
Similarly, the number of mortgagee listings for non-landed homes, comprising apartments and condominiums, rose by 36.5 per cent from 104 units last year to 142 this year. Of these, 77 were large apartments that are greater than 1,500 sq ft in size. Specifically, 27 of them were located in the prime residential districts of 9, 10 and 11.
Ms Ng comments, “We see an increase in the number of these larger non-landed homes as mortgagee listings – particularly in the prime districts – because of the drop in both foreign and local buying interest, as well as affordability concerns arising from the restrictive loan curbs. Furthermore, owners are finding it challenging to secure tenants amid a weak leasing market plagued by supply woes and expatriates’ shrinking housing budgets.”
Over in the industrial sector, there was similarly a notable jump in the number of mortgagee listings – from 17 in 2014 to 36 in this year. Many of the industrial properties were small strata-titled industrial units in various locations such as Kaki Bukit, Ubi, Geylang and Boon Lay.
Ms Ng points out, “Due to the tough industrial leasing market conditions, many small-scale investors, who entered the industrial market prior to the government’s imposition of Sellers’ Stamp Duty and TDSR in 2013, are now finding it challenging to service their bank loans.
“In addition, owing to the macro-economic uncertainties, end-users and industrialists were cost sensitive and cautious on their space requirements. Competition for qualifying industrial tenants has also intensified, following the net addition of approximately 5.7 million sq ft of new multi-user factory space in 2014 and 3.7 million sq ft in the first nine months of 2015.”
Sales at Auctions
33 properties were sold at auctions in 2015, chalking up a total sales value of SGD101.62 million. While the number of sales at auctions was almost the same as the 32 properties sold in 2014, the overall sales value was up by about 40 per cent, as compared to the SGD72.5 million achieved last year.
The increase in sales value was primarily due to the transaction of four high-value properties4
in 2015, which garnered a total sales value of SGD43.73 million. In comparison, the four high-value properties sold in 2014 generated only SGD27.85 million.
Outlook in 2016
Ms Ng concludes, “Going forward, the number of mortgagee sales is forecast to stay on a stable uptrend to potentially exceed 270 next year, more than the number recorded during the Global Financial Crisis in 2008. This is especially in the light of yesterday’s Federal Reserve’s rate hike of 0.25 per cent, which will add further strain to borrowers in financing their mortgages. The bulk of the mortgagee listings will still be made up of large landed and non-landed homes, as well as strata-titled industrial units.
“However, we forecast that the total sale value for the Singapore auction market in 2016 is likely come in at approximately SGD80-90 million – lower than the SGD101.62 million this year which was boosted by the sale of high-value properties.”
According to figures from the Urban Redevelopment Authority (URA), as of Q3 2015, there are 6,058 launched and unsold private residential units, 10,515 unlaunched private residential units and 1,693 unsold completed private residential homes with pre-requisites for sale.
As of Q3 2015, URA figures showed that around 43,000 private residential homes are expected to be completed from Q4 2015 to 2017, of which 52 per cent are expected to be ready in 2016.
High-value properties refer to those that are worth at least SGD5 million and above.