Property auction market down led by lack of big-ticket items for sale

699

A report released by Edmund Tie & Co on 28 June said that there were more owners’ listings placed in the property auction market for Quarter 2 (Q2) but that there was a dip in mortgagee sales this quarter.

Q2 2018 has seen a total sales value of $19.64m in the property auction market.

However, there is a year-on-year (y-o-y) dip of approximately 33.0 per cent, from $29.48m in Q2 2017. When compared to quarter-on-quarter (q-o-q) to Q1 2018, the result of the property auction market in Q2 2018 has dipped marginally from the first quarter’s sales value of $19.97m.

The units sold via property auction in Q2 2018 are as follows. Private treaty sales and units transacted before or after the auction are not included in the list.

Property Auctioned amount Property type Seller profile
International Plaza, #43-12, 10 Anson Road (D02) $1,138,000 Residential Mortgagee
Spottiswoode 18, #32-06, 18 Spottiswoode Road (D02) $850,000 Residential Mortgagee
Tanglin View, #15-04, 150 Prince Charles Crescent (D03) $1,550,000 Residential Estate
42 Hoot Kiam Road (D10) $3,200,000 Residential Owner
Botanic Gardens Mansion, #08-22, 18 Taman Serasi (D10) $2,650,000 Residential Estate
25 Pasir Ris Way (D18) $5,000,000 Residential Mortgagee
26 Burghley Drive (D19) $3,120,000 Residential Owner
I.Biz Centre, #02-06, 32 Old Toh Tuck Road (D21) $670,000 Industrial Owner
Tree House, #02-05, 60 Chestnut Avenue (D23) $734,000 Residential Mortgagee
Innovation Place, #07-02, 29 Mandai Estate (D25) $725,000 Industrial Mortgagee

While the number of units hammered down y-o-y has maintained at 10 units, the decrease in sales value from 2017 may also be due to the lack of high quantum properties being sold this year. Q2 2017’s sales value was higher from the auctioning of several big-ticket items such as a bungalow at Chestnut Drive at $11.38m, a shophouse at Jalan Besar at $5.23m, and three other residential units above the $3m mark.

Head of Auction & Sales Joy Tan commented, “We have transacted several high-end properties this quarter before the auctions via private treaty. Even so, the only auctioned unit with a higher sales value was a semi-detached unit at 25 Pasir Ris Way, within the Pasir Ris Beach Estate. This mortgagee sale unit, which debuted on the ET&Co auction floor in May, attracted 15 bids from several keen parties and resulted in a successful bid of $5m.”

The humble mortgage calculator is an essential tool for all types of home buyers

Shifting from previous trends, mortgagee sales and owner/estate sales were equally popular among bidders this quarter. Although they share the same number of transactions, owner/estate sales total to $11.19m, while mortgagee sales total to approximately $8.45m, a $2.74m difference. Comparatively, 2017 saw a total of 33 forced-sale units (under mortgagee’s, receiver’s, sheriff’s sale etc.) and 12 volunteered sale units (under owner’s, estate’s, trustee’s sale etc.).

Tan also commented, “In past years, we noticed that mortgagee sales have dominated the auction floor. However, owners’ listings have caught up and exceeded the number of mortgagee sales this quarter. This is a reflection of how the market has accepted auction as an alternative way to sell their properties.”

Unlike other markets, the present-day auctions at the Singapore one may not result in significant savings for the successful bidders. The bidding wars of the past which saw properties being sold for higher prices than their valuation price are also almost non-existent.

Most “star buys” and “exceptional deals” may refer to a mere 5 to 7 per cent savings from the valuation price. Past auctions suggests that most auction properties sell at close to valuation prices. This is because most property auctions here are not comprised mainly of distressed sales. The fact that most real estate in the property auction market do not have a ‘sell-by-date’, or reserve prices are other reasons why the prices in the Singapore market are much higher than elsewhere.

The reserve price for real estate in the property auction market here is set by the sellers and is based loosely on the valuation. This is another reason why it’s hard to find a good buy at property auctions here.

The successful bidders of auction properties here also have to pay only between only 5 to 10 per cent in cash (the rest is paid with a bank loan, or an in-principle approval from a bank). This is unlike property auctions in other markets were successful bids would have to be paid for with all cash. This is another reason why property auctions here is not so exciting.

But the fact that interest rates here are rising, might provide some much welcomed news for those that are looking for a good deal in the property auction market.

The recent US Federal Reserve interest rate hikes are having an impact on credit cards, mortgages, vehicle loans and bank savings accounts here. This is because Singapore interest rates are closely correlated with those in the US.

The Fed will likely turn aggressive this year affecting market sentiments

The SIBOR (Singapore interbank offered rate) for example has risen, denting some of the enthusiasm in the buoyant property market.

Property auction marketSince the beginning of this year, banks have raised interest rates for both fixed and floating home loan packages by 10 – 30 basis points (bps). Some banks have already upped their mortgage rate to 2.05 per cent, to keep pace with the increasing interest rates.

The 3-month SIBOR has hovered at 1.41 per cent since May. The further increase announced by the US Federal Reserve on Wednesday is expected to drive the interest rates for mortgage loans even higher.

DBS is now charging 1.95 percent a year for each of the three years for its 3-year fixed rate package, while UOB recently increased its 3-year fixed rate package to 2.05 percent a year for each of the three years. OCBC, on the other hand, raised its 2-year fixed rate package to 1.85 per cent.

The higher interest rates charged by the banks may mean that more distressed real estate will hit the property auction market soon – and this may be good news for bargain hunters.

If you are hunting for a Singapore property, our Panel of Property agents and the mortgage consultants at icompareloan.com can help you with affordability assessment and promotional loans. The services of our mortgage loan experts are free. Our analysis will give industrial property loan seekers better ease of mind on interest rate volatility and repayments.

Just email our chief mortgage consultant, Paul Ho, with your name, email and phone number at paul@icompareloan.com for a free assessment.