Number of residential properties placed under the hammer shot up in 2015.
By Romesh Navaratnarajah
Singapore’s languishing property market is seeing more homeowners trying their luck at auctions.
A recent Knight Frank report revealed that the number of properties that went under the hammer increased marginally by 2.9 percent over a quarter to 180 units in Q2 2015. Specifically, properties submitted for auction under mortgagee listings fell 22.2 percent to 42 units during this period.
But the number of industrial properties auctioned off soared 85.7 percent quarter-on-quarter to 39 units in Q2 2015, the first time that the number of industrial units on auction crossed the 30-unit mark since the second quarter of 2013. Of these, eight units came under non-owner sale listings.
The consultancy noted that investors owning strata-titled industrial units are finding it tough to lease their premises at expected returns given the growing supply of industrial units. As such, these investors view the auction market as a viable alternative to selling their industrial properties.
Re-emergence of small units
The last quarter also saw owners of smaller residential units, one- and two-bedders, put 27 units up for auction, up 28.6 percent from the previous quarter.
“The period also saw shoebox units put up for auction for the first time since Q4 2014. Of the four shoebox units that were on auction, three were under mortgagee sale,” said the report.
Knight Frank attributed the re-emergence of shoebox units under mortgagee sale to their waning appeal as a property investment option and the slow leasing market.
Although more properties were put on auction in Q2 2015, the number of properties sold plunged 36.4 percent to seven properties. This translates to a success rate of 3.9 percent, a decline from 6.3 percent in Q1 2015.
Consequently, total auction sales value fell 72.1 percent quarter-on-quarter to $10 million, with the industrial sector accounting for $3.2 million.
According to Knight Frank, Q2 2015 is generally a slow period due to the June school holidays.
It added that the drop in value and success rate may also be due to potential buyers’ preference to negotiate privately with sellers after the auctions.
The wide disparity in buyers and sellers’ price expectations may also be a factor too.
Meanwhile, Colliers International revealed that a total of 378 properties were put on auction during the first half of 2015. This works out to a 38.5 percent increase from H2 2014’s 273 listings.
Specifically, mortgagee listings climbed 10.5 percent from the 95 in H2 2014 to 105 listings in H1 2015, said Colliers.
Rare GCB makes auctions list
Residential homes accounted for majority of the mortgagee listings at 79.1 percent – non-landed private homes took up 64.8 percent while landed homes made up 14.3 percent. Among them was a Good Class Bungalow (GCB) site at Binjai Rise. Colliers said this is the first time a GCB was put up for auction sale by a bank since 2007.
The report also noted a growing trend of large apartments, or units measuring over 1,500 sq ft, being put up by mortgagees for auction sale. In fact, 37 of such properties were placed under mortgagee listings during the first half of 2015, compared to 51 in 2014, eight in 2013 and five in 2012.
Grace Ng, Deputy Managing Director of Colliers International, said owners of such properties find it hard to sell them since their large unit floor area translates to a higher price quantum.
“Some of these larger units are two-storey penthouses with large open terraces or balconies and a private swimming pool,” she said.
“These sizable non-landed homes, which were popular during the market boom in 2007/2008, are now languishing in demand – suffering from a wane in both foreign and local buying interest due to affordability concerns that followed stringent loan curbs.”
Owners of these large properties also found it hard to secure tenants, given the drop in the housing budget of expatriates, which eventually resulted in difficulties to service their mortgage loan, she said.
The increasing interest rate, the mounting supply of residential units as well as the property cooling measures and loan curbs have all made it hard for owners to dispose their properties.
“Investors also found it challenging in leasing their properties, on the back of the competitive supply of completed homes for rent,” said Colliers.
As at Q1 2015, 18,437 more non-landed private homes are set to be completed by end-2015, while around 20,317 non-landed private homes are expected to enter the market by 2016.
Industrial surge
Aside from the increasing number of large-sized apartments, Colliers also noted that the number of strata-titled industrial properties put up for mortgagee sales more than doubled from six in 2H 2014 to 15 in H1 2015.
These included units from Entrepreneur Business Centre, UB One, Paya Ubi Industrial Park and Empire Techno Centre – all of which are situated in the Kaki Bukit/Ubi area; as well as from Penjuru Tech Hub and Pantech Business Hub in the West.
“Strata industrial property owners, who are in default, face stiff competition for tenants, owing to the abundant supply of strata-titled industrial units in the market. What is more, the lull in the industrial property sector is worsened by the government loan curbs,” said Ng.
Overall, 17 properties were sold at auction in H1 2015 amounting to $45.14 million. This is almost similar to the sales value registered in 2H 2014 and significantly higher compared to H1 2014’s $27.145 million.
Due to affordability concerns, properties with prices tags of around $1.5 million or lower proved popular among buyers, said Colliers.
Residential units, for instance, at The Plaza and Golden Mile Complex – both in Beach Road – were sold for $700,000 and $1.4 million respectively, while an Eastgrove unit was clinched at $950,000. The first half of 2015 recorded only one high-value deal, which involved the $2.5 million sale of a row of shophouses at Teck Chye Terrace in Upper Serangoon Road.
“This year, the auction rooms continued to be jam-packed, with some sessions seeing an overwhelming attendance of more than 200 people,” stated Ng.
But much like what was seen in Q2 2015, sales figures remained moderated as potential buyers prefer to go for private negotiation after the auctions.
The outlook for auctions
“With the government cooling measures likely to remain in the near term, the property market outlook remains subdued and may result in further slowdown in some property segments. Owners who are overly leveraged may find it challenging to cover their monthly mortgage commitments, resulting in potential mortgagee sales.
“In Q2 2015, the value of mortgagee sales amounted to $4.58 million. Given the muted transactional activity in other segments, mortgagee sales contributed to some 67 percent of the total transaction value in that quarter, slightly higher than the 57 percent recorded in Q1 2015. With a wider range of properties to choose from, and as sellers adjust their expectations, there exists greater buying opportunities and equally more deals being sealed, in the near term.”
Mok Sze Sze, Head of Auction and Sales, Singapore, JLL.
“Looking ahead, the current observations of an increasing number of mortgagee listings – in particular, large apartments of more than 1,500 sq ft and strata-titled industrial units – will continue.
“Buying interest for properties put up for auction sale is expected to remain high. This will be especially so for non-landed homes in the prime residential districts of 9, 10 and 11, where prices have shown relatively steeper correction in the last two years.
“On the back of government cooling measures, loan curbs and impending rising interest rates, the pool of potential buyers will shrink; hence, it is expected that affordable properties priced $1.5 million and below will continue to be popular.
“The total sale value of 2H2015 is expected to be in the range of $30-35 million. This will bring the total sale value for the entire year to be about $80 million, slightly higher than the $72.5 million recorded in 2014.”
Grace Ng, Deputy Managing Director, Colliers International.
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