Overall Auctions Performance
– The total number of properties put up for auction decreased 12.3 per cent on an annual basis, from 778 properties in 2015 to 682 properties in 2016.
– 41 properties went under the hammer in the year, bringing the overall success rate to 6.0 per cent. In comparison, 39 properties were sold in 2015, reflecting a success rate of 5.0 per cent.
– Total sales value saw a decline of 9.3 per cent on an annual basis from S$102.27 million in 2015 to S$92.80 million in 2016.
Sharon Lee, Director & Head, Auction, Knight Frank Singapore said that “In light of the gloomy economic outlook, the total number of properties put up for auction under mortgagee sale can be expected to cross the 250- unit mark in 2017.”
Mortgagee listings increased on the back of a slowing economy, notwithstanding the fall in total number of properties put up for auction in 2016
– In 2016, 243 properties were put up for auction under mortgagee sale, which occurs when the borrower is unable to meet his or her financial obligation, resulting in the lender repossessing and putting the property up for sale to recover its debt. This represented a 13.5 per cent increase from the previous year (214 properties) and made up 35.6 per cent of all properties put up for auction this year – a substantial proportion in the recent years (Exhibit 1).
– Non-residential properties contributed 78 mortgagee listings, representing an increase of 85.7 per cent over the same period. Shops and shophouses witnessed an increase of more than threefold to put up 35 units for auction in 2016. This represented 23.3 per cent of total shops & shophouses put up for auction. The industrial sector saw 38 mortgagee listings, translating to an increase of 18.7 per cent from the 32 industrial properties put up for auction under mortgagee sale last year. HDB shops and the office sector both showed an uptick of two mortgagee listings to see three and two units put up for auction in 2016.
– The significant increase in mortgagee listings seen in the shops & shophouses as well as industrial sectors alluded to the mounting challenge faced by owners to service their mortgage amidst a weakening economy. GDP contracted by 4.1 per cent q-o-q (seasonally adjusted annualised basis) and grew a meagre 0.6 per cent y-o-y in Q3 2016, according to advance estimates from the Ministry of Trade and Industry.
– On the other hand, the number of residential mortgagee listings dipped 4.1 per cent from 172 units in 2015 to 165 units this year.
– The success rate for mortgagee listings was 9.9 per cent (24 out of 243 properties put up for auction under mortgagee sale). This was equivalent to 58.5 per cent of total transaction volume (24 out of 41 units) or 41.2 per cent of total transaction value (S$38.26 million out of S$92.80 million) in 2016.
Industrial sector achieved the highest success rate among all sectors in 2016; prime residential segment remained slow
– A fall in the in the total number of properties put up for auction in 2016 was led by a larger contraction in the residential sector listings (19.4 per cent) vis-à-vis the nonresidential sector listings (1.3 per cent).
– In line with mortgagee listings, the number of HDB shops and shops & shophouses put up for auction grew by 47.1 per cent and 19.0 per cent, to put up 25 and 150 properties for auction in 2016 respectively (Exhibit 1).
Q4 2016 HOUSEVIEW | SINGAPORE
– The industrial sector led in terms of success rate (10.2 per cent). As a result, sales value of industrial properties increased 65.5 per cent compared to the previous year. Majority of these purchasers were end-users who bought on a need basis, motivated by the attractive pricing. For instance, a unit at Ubi Techpark with rental yield above 5.0%, was sold during auction at S$2.59 million, translating to a price of S$330 per square feet (psf).
– The total number of residential properties in districts 1, 9, 10 and 11 put up for auction amounted to 73 units, the lowest since 2013 (60 units).
– 33 prime residential properties were put up for auction under mortgagee sale. This made up 45.2 per cent of all prime residential listings, again reflective of a muted economy and leasing woes.
– A total of 682 properties were put up for auction this year; although this represented a decrease of 12.3 per cent from the preceding year, it was still higher than the total annual listings in the years 2010 to 2014. The number of mortgagee listings was also at a five-year record high with 243 units. In light of the gloomy economic outlook, the total number of properties put up for auction under mortgagee sale can be expected to cross the 250-unit mark in 2017.
– S$38.26 million (41.2 per cent) of the S$92.80 million worth of transactions in the auction market was derived from mortgagee sales. With the US Federal Reserve having lifted interest rates by a quarter point today (15 December 2016) and projecting three rate increases in the year ahead, mortgagee sales transactions may continue to rise on the back of increased mortgagee listings and moderated price expectations.
– With a downgrade in Singapore’s full-year growth forecast expected, the proportion of non-residential properties put up on auction will likely increase in the coming year.