Live property auction sees real estate being sold at 22% above opening price

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Knight Frank conducts successful live property auction, sells house at 22% above opening price

Despite current economic uncertainties, interest for properties has not waned in the auction market. At the first live property auction held on its premises since the circuit breaker, Knight Frank Singapore successfully sold a property at 14 Lorong Kismis for S$1.32 million, or 22% above its opening price of S$1.1 million.

live property auction
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The 2-storey, semi-detached house sits on a land sized approximately 305.7 sqm (3,290 sq ft) and has a leasehold tenure of 99 years, with effect from 1972.

Ms Sharon Lee, Head of Auction and Sales, Knight Frank Singapore, said, “Located within a highly coveted residential area, 14 Lorong Kismis is situated in great area where everything is within reach, in the surrounding neighbourhood. We were also pleasantly surprised by its popularity, as the property was hotly contested and knocked down in just under 10 minutes.”

The successful event was held on 16 October 2020, welcoming a healthy turnout of over 30 guests to a live property auction event that had to take a backseat in the past months, due to ongoing safety measures surrounding Covid-19.

The live property auction was conducted with strict social distancing measures and regulations in place, with all attendees masked up during its duration.

The oldest real estate auction house in Singapore, Knight Frank pioneered the country’s first-ever property auction in a boxing ring at the then-known Happy World amusement park. 80 years on, the firm said it is proud to remain a leader in property auctions, a service line which continues to be a stronghold of the business, even during challenging times.

The next auction will be held online on Friday, 30 October 2020. Interested parties can register to view the live property auction online.

In March, Colliers International, in its research report which examines the performance of the real estate auction market in Singapore in 2019 and its forecast on auction listings this year, said 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.

Ms 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.

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.

Mr 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 S$50.1 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 S$38.5 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.”

Written by Ravi Chandran


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