According to leading global commercial real estate services firm, Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG), the Singapore property auction market saw a total of 70 mortgagee listings in the first quarter of 2016, which is the same number recorded in Q4 2015. The last highest number of mortgagee listings was in Q2 2008 at 71.
On a year-on-year (YOY) comparison, the number of mortgagee listings this quarter was higher than Q1 2015 by 25 per cent.
Ms Grace Ng (黄黎明), Deputy Managing Director of Colliers International, says, “The YOY jump in the number of mortgagee listings reflects the increasing difficulties that property owners are facing in servicing their monthly mortgages. The situation is further aggravated for those who own multiple properties – particularly in light of the current economic uncertainties, the slowdown in China, the risk of further interest rate hikes, the stock market turbulence, unemployment risks and sombre property market conditions.”
She adds, “In fact, this quarter records the highest quarterly number of industrial mortgagee listings in five years, as well as an increase in the number of strata-titled office and retail mortgagee listings.”
Mortgagee Listings by Sector
- Highest quarterly number of industrial mortgagee listings in five years
In Q1 2016, the number of industrial mortgagee listings climbed to 13, accounting for almost 20 per cent of the total mortgagee listings during the quarter. This is also the highest quarterly number of industrial mortgagee listings in five years.
Many of the industrial mortgagee listings in Q1 2016 are strata-titled factories; some of which included units at Ubi Techpark, UB One and Entrepreneur Business Centre in the Kaki Bukit and Ubi localities, as well as at Pantech Business Hub on Pandan Loop and Pioneer Junction at Soon Lee Street.
The rise in the number of industrial listings was due in part to the tough industrial leasing market conditions.
Ms Ng comments, “Owing to macro-economic uncertainties, end-users and industrialists have been cost sensitive and cautious about their space requirements. Competition for qualifying tenants has also intensified, following the net addition of approximately 5.7 million sq ft of new multi-user factory space in 2014 and 4.8 million sq ft in 2015.”
“Consequently, many small-scale investors who entered the industrial property market before the government’s imposition of the Sellers’ Stamp Duty and Total Debt Servicing Ratio requirements in 2013, are now finding it challenging to secure tenants to help service their bank loans. And the situation is worsened for investors who hold multiple units,” adds Ms Ng.
- Increased number of strata-titled office and retail mortgagee listings
In Q1 2016, lenders put up two office listings and seven retail listings for auction. This is in stark contrast to the previous quarter, during which there were no office mortgagee listings and only three retail mortgagee listings. In fact, for the whole of 2015, lenders did not place any office units under the hammer and there were only 13 listings for retail properties.
This is a reflection of the tough investment environment and rental market, as tenants and small businesses continued to be affected by the high business operating cost and manpower shortages.
- Residential listings continue to dominate mortgagee listings in Q1 2016
There were a total of 48 residential listings as mortgagee sales during the quarter; of which, 33 were non-landed properties and 15 were landed properties.
Unsurprisingly, many home owners found it tough to secure their own buyers due to the weak buying sentiment, following multiple rounds of government cooling measures, loan curbs, as well as the generally uncertain economic conditions and interest rate risk. There was also a wide gap in the price expectations between sellers and buyers.
Notably, of the 33 non-landed residential mortgagee listings, 15 (a high percentage of 45 per cent) were larger, and typically pricier, apartments and condominiums with floor area of above 1,500 sq ft. Breaking down the number further, 5 of them are located in the prime residential districts of 9, 10 and 11.
Examples of such large-sized apartments and condominiums placed under the hammer by lenders in Q1 2016 included units at The Serenade @ Holland (Holland Road), Prestige Loft (Telok Kurau), Turquoise (Sentosa), Tan Tong Meng Tower (Thomson Road) and The Sail @ Marina Bay (Marina Boulevard).
Meanwhile, the number of landed residential mortgagee listings remained high at 15 in Q1 2016. There were 50 landed residential mortgagee listings in the entire 2015, which is double from 19 recorded in 2014.
Many of the landed properties in Q1 2016, which were auctioned by lenders, were those with larger areas such as corner terraces, semi-detached houses and detached houses, which have around or above 3,000 sq ft in land or built-up area and are worth more than SGD3 million.
Additionally, two large detached houses at Woo Mon Chew Road (Upper East Coast Road) and Branksome Road (off Tanjong Katong Road) were put up by the receiver and lender, respectively, for auction this quarter. Often, detached houses emerging as mortgagee sale is a sign of business failure by the owners.
Sales at Auctions
Eight properties were sold at auction in Q1 2016, generating a total sale value of SGD9.615 million. They comprised six mortgagee sales and two owners’ sale:
- A shop unit at Parklane Shopping Mall (Selegie Road) sold for SGD450,000
- A shop unit at Sultan Plaza (Jalan Sultan) sold for SGD475,000
- A HDB shophouse at Clementi West sold for SGD1.65 million
- A factory at Yi Xiu Factory (Sims Avenue) sold for SGD780,000
- A factory at Woodlands Industrial Park (Woodlands) sold for SGD820,000
- A residential apartment at Serenade at Holland (Holland Road) sold for SGD1.7 million
- A conserved shophouse at Geylang Road sold for SGD2.9 million – trustee/owner sale
- A residential privatised HUDC unit at Rio Casa sold for SGD840,000 – owner sale
There was an absence of high-value property sales in the first quarter and many prospective buyers also refrained from bidding during the auctions as they wanted to negotiate for a better price after the auctions.
Outlook for 2016
Going forward, lenders are expected to place more properties under the hammer for the rest of 2016, keeping the number of mortgagee listings elevated. However, the numbers are not expected to surge, as the average annual resident unemployment rate remains low at 2.8 per cent in 2015.
Ms Ng comments, “We expect to continue seeing more commercial and industrial mortgagee listings through the year, which will likely arise from small investors with stretched finances struggling with bank loans, as well as from companies which go under amid the challenging business operating climate, and slowdown in the oil and gas sector. Owners or investors with retail properties at unfavourable locations will be at higher risk of loan default due to the difficulties in securing tenants.”
She concludes, “The number of mortgagee listings or repossessed properties put up for auction by banks and financial institutions are expected to stay on a stable uptrend, potentially exceeding 270 listings for the whole of 2016. Meanwhile, auction activities are projected to turn in some SGD70 million worth of sales transactions for the whole of 2016.”