The total number of transacted properties is expected to cross the 40-unit mark by end-2015 amid continuing weak market sentiment.
The Singapore auction market witnessed a strong start to 2015 with notable increase in the number of properties put up for auction and the number of properties sold, according to Knight Frank Research. More properties are expected to be put up for auction in 2H 2015, as owners could face difficulties to lease their units or service their mortgage loans, likely to be further aggravated by continually weak market sentiment and probably interest rates hikes.
The total number of transacted properties is expected to cross the 40-unit mark by the end of 2015.
1Q 2015 kicked off on a positive note with a significant increase of 161.2% from the last quarter, by achieving an aggregate sale value of SGD35.8 million in 1Q 2015.
Total mortgagee sales amounted to approximately SGD21.2 million in 1Q 2015, representing a 54.4% increase from the last quarter.
Successful sales of residential properties dominated the market with a total value of SGD20.4 million in 1Q 2015 – all residential auctions were under mortgagee listings.
Non-owner sales up
The number of properties put up for auction rose by 35.7% q-o-q to a total of 175 units in 1Q 2015, an increase of 46 properties from 4Q 2014. Owner sale properties continued to form the bulk of properties (63.4%) on the property auction market in 1Q 2015. However, non-owner (including mortgagee sale, estate sale, receiver’s sale, etc) properties saw a significant increase by 20.8% q-o-q and 113.3% y-o-y from 30 units in 1Q 2014 to 64 units in 1Q 2015.
Under the non-owner sale category, the number of properties offered for auction under the mortgagee listings saw a notable increase 22.7% q-o-q to 54 units in 1Q 2015. On a y-o-y basis, it represented a massive 200% jump from a total of 18 properties that were put up for auction in 1Q 2014. The remaining 10 properties were trustee and estate sales, made available for sale under non-owner category in 1Q 2015. These properties were residential in nature with a mixed of landed housing and apartments.
Persistently weak sentiment stemming from the property cooling measures on the residential sector, coupled with the Total Debt Servicing Ratio (TDSR) and softening leasing market contributed to the residential sector forming the bulk (70.3%) of the auction listings in 1Q 2015. Owners could probably be facing daunting challenges to service their mortgage loans with rising interest rates and were increasingly susceptible to mortgage defaults.
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Mortgage sales market saw more bargain-hunters as overall success rate increased. The number of properties successfully auctioned rose by a significant 57.1% q-o-q to 11 properties in 1Q 2015. Buyers are evidently sourcing for “good bargains” from mortgagee listings in the auction market.
The residential sector led the other sectors by selling 9 out of the total 54 mortgagee sale properties that were available for auction. An adjoining row of 5 refurbished shophouses located at the Teck Chye Terrace was the only owner sale property that was successfully auctioned in the quarter.
In view of the uncertain global economic outlook this year, a higher number of properties are expected to be put up for auction in 2H 2015. Residential properties will continue to lead the other market sectors in successful auctions, as the demand for residential properties in the resale market has been relatively weak over these few quarters which could potentially result in more mortgage defaults.
The cooling measures are less likely to be lifted in the near term for this year and coupled with rising completed supply of private residential in 2014 and 2015, property sellers face increasing competition to close sales amid the stagnant pool of prospective buyers.
On the other hand, buyers could be taking advantage of the lacklustre sentiment and actively participate in auctions, while sourcing for potential value-buys in these auctions. They will also be spoilt for choice with the potential increase in auction properties at relatively attractive prices. Unique properties such as landed properties in prime districts 9, 10 and 11 with tranquil surroundings may appeal to interested investors or buyers with an eye for such “hidden gems”.
With industrial space demand likely to moderate amid rising supply or completed space, more strata-titled industrial units could be placed on auction this year, albeit with gradual increase.
Transactional activity is expected to pickup in the next two quarters of 2015 as the auction market has been revived with the spike in activities during 1Q 2015. It is expected that the number of transacted properties could hit the 40-unit mark by the end of 2015.