Ravi Chandran
Auction listings in Singapore hit record high in 2019 and could continue to climb in 2020 on fallout from COVID-19 outbreak
- Real estate auction listings hit new high in 2019 at 1,458 listings, up by 34% from 2018. Nearly 52% of the total listings were mortgagee sales at 751 listings, also a record high for the number of property foreclosures by banks (Auction listings – include re-listings – comprise owner sale and mortgage sale listings across all auction houses in Singapore.)
- Successful sales dipped 40% YOY with 21 properties transacted during auctions in 2019. Total auction sales value remained stable at SGD50.1 million in 2019 (Auction sales refer to properties sold during auctions (excluding private treaty sales done before or after auction sessions).)
Colliers International on March 10, published its latest research report which examines the performance of the real estate auction market in Singapore in 2019 and its forecast on auction listings this year.
Based on data tracked by Colliers Research, total auction listings rose by 34% year-on-year (YOY) in 2019 to a new high of 1,458 listings – surpassing 2018’s record of 1,088 listings. The number of both owner listings and mortgagee listings saw strong increases last year, with mortgagee listings rising to a record level in 2019.
Auction listings scaled new heights
Due to a more challenging economic environment, total mortgagee listings surged by 59.1% YOY to 751 in 2019, driven mainly by residential sector. Meanwhile, total owner listings were up by 14.8% YOY to 707 as owners continued to sell their properties via auctions for maximum exposure and a higher chance to achieve optimal prices.
The number of listings rose across the board, with residential properties leading at 54.1% increase YOY to 798. Retail listings rose by 21.8% YOY to 302, industrial listings were up by 10.5% YOY to 306, and office listings rose by 17.1% YOY to 48.
Of the mortgagee sale listings, the residential sector accounted for 57.5% of the total at 432 listings – up by 67.4% YOY. Retail mortgagee listings saw a 72.7% YOY increase to 114 as many were small units in strata-titled malls or locations with low foot traffic and had difficulty finding tenants or sustainable rents, leaving owners unable to support mortgage payments. Industrial mortgagee listings, meanwhile, rose 29.5% YOY to 189 and office mortgagee listings increased by eight times to 16 in 2019 from just 2 in 2018.
Tricia Song, Head of Research for Singapore at Colliers International, said, “We believe the higher mortgage payments due to rising interest rates during 2015-2019, coupled with a subdued residential rental market, have contributed to the increase in residential mortgagee sale listings. Personal circumstances such as loss of job or bankruptcy could also have led to higher defaults. Post cooling measures in July 2018, we think possibly more distressed owners were unable to dispose of properties quickly enough and may have defaulted on their loans.”
Colliers Research expects total listings could grow by 10% in 2020 as more properties are put up for sale amid an uncertain environment, particularly in view of the potential economic impact should the COVID-19 outbreak becomes protracted.
“Summary & Recommendations
The number of properties listed for auction in 2019 surpassed 2018’s level by 34%, reaching a new record at 1,458 listings. The number of properties put up for mortgagee sales by banks was also at a record high.
- Total auction sales value of the 21 properties knocked down in 2019 remained relatively stable at SGD50.1 million as average ticket size has increased.
- January-February 2020 have been tracking well with 2019, with 208 listings and one sale.
- We recommend owners and buyers use auctions as an efficient, high-profile platform to sell and buy properties. We expect listings to grow 10% in 2020 as more properties are put up for sale amid an uncertain environment.”
Auction sales continued to fall
The total number of properties sold at auctions in 2019 continued to drop to 21 properties (16 mortgagee sales and 5 owner sales), a decline of 40.0% YOY from 35 properties knocked down during auctions in 2018. Of the 21 units sold during auctions in 2019, 11 were non-landed residential units, nine strata-titled industrial and retail units, and one shophouse.
With rising listings, the success rate fell further to 1.4% in 2019, much lower than the 3.2% achieved in 2018 and it is the lowest annual level in Colliers Research’s database.
Steven Tan, Senior Director of Capital Markets at Colliers International, said, “We believe the declining success rate reflected the continued price gap between buyers and sellers. Also, we notice that only 8 out of 21 (or 38.1%) of the properties sold during auctions were transacted above their respective opening prices, indicating that buyers remained cautious during auctions and sellers are still holding onto prices. It may also be a case of buyers needing more time before taking the plunge, which resulted in some sales being done after auction sessions – these sales are not reflected in the data set under successful auction sales.”
Despite the lower number of sales in 2019, the total aggregate value of properties sold at auctions remained relatively stable at SGD50.1 million, a marginal decline of 1.7% YOY, due to the higher quantum per unit transacted in 2019.
Notably, mortgagee sales value increased 25.3% YOY to SGD38.5 million as the average value of foreclosed properties in 2019 almost doubled that of 2018. Mortgagee sales value accounted for 76.8% of total auction sales value, up from 60.3% in 2018.
Ms. Song added, “We remain watchful of the market and would expect some potential distress from the ongoing COVID-19 outbreak if it leads to a protracted downturn. In particular, mortgagee sales in the retail, industrial, and residential sectors could increase in the second half of 2020. Given the uncertain environment, we anticipate that the price gap between sellers and prospects could narrow and in turn, sales and success rate may improve.”
