This led to surge in mortgagee-sale listings; time taken to sell such property longer now
Buffeted by economic uncertainties as the United States-China trade war dragged on, owners of residential properties in prime districts last year defaulted on bank loans, contributing to one of the greatest number of mortgagee-sale listings seen in recent years.
Meanwhile, the time taken to sell a mortgagee-sale property has lengthened with buyers taking a wait-and-see approach, say industry experts.
Auction figures for properties have not given sellers much hope either. In its quarterly research bulletin on the auction market published recently, consultancy Knight Frank Singapore said its success rate last year stood at 1.4 per cent, down from 3.1 per cent in 2018.
The report also showed that the number of residential listings under mortgagee sales rose for the third consecutive year last year, surging by 62.6 per cent year on year to 356 listings.
Commercial and industrial properties also saw the greatest number of mortgagee-sale listings since 2014, with 115 and 153 listings respectively. The figures include repeat listings.
The report linked the surge in residential listings last year to more applications for bankruptcies and increased volatility within the equity markets. More retrenchments, hikes in interest rates and drops in rental income were reasons cited for mortgagee sales between 2014 and 2017.
“Slowing economic growth and the US-China trade war have also led to an accumulation of bad debts and a fall in top-line growths, pressurising some owners to default on mortgage payments,” said Knight Frank of the increase in mortgagee-sale listings last year.
There were more mortgagee-sale listings from prime districts such as Orchard, Cairnhill and River Valley.
A mortgagee sale of a good class bungalow by Deutsche Bank was reportedly put up for auction thrice last year, before being withdrawn all three times at the opening price, with no bids or counter offers received. Knight Frank eventually found a buyer through private treaty.
“The slower economic growth not only impacted owners of upper-middle income, but also adversely affected individuals of high net worth who owned firms that suffered a contraction in orders,” Knight Frank said in its recent report.
Its data showed 68 penthouses were listed under mortgagee sale last year, up from 23 in 2016.
DBS senior economist Irvin Seah said economic uncertainties will continue to affect home owners’ income and interest rates. “Those in the high-income group are either professionals or business owners who are often employed in industries that tend to be externally oriented and more volatile,” he said.
“The economic factors will affect the business cycle and directly affect this group of people. Once the income string is affected, repayment of mortgage will also be affected.”
As the economic outlook remains subdued, industry experts expect the number of mortgagee-sale listings to rise this year.
Mr Nicholas Mak, head of research and consultancy at ERA Realty, said that with more mortgagee-sale listings, it would take more effort to sell a property by auction. “It’s becoming more competitive as every auction house is ramping up its efforts. There are more and more advertisements. It is good for the buyers as they now appear to have more choices.”
Citing statistics compiled by ERA Auction, as well as auctioneers Knight Frank, Colliers International, Edmund Tie & Co, JLL and PropNex, Mr Mak said “almost 48 auction listings were required before one residential mortgagee-sale property could be sold, compared with just 12 listings in 2018”.
ERA figures showed last year that only eight residential mortgagee sales were achieved in auctions, while 25 properties were sold before and after auctions.
In 2018, there were 23 residential mortgagee sales. Eighteen were sold under the hammer and the rest were sold before and after the auctions.
Mr Mak said potential buyers started holding back when prices slipped in the last quarter of 2018, hoping prices would dip further.
“Some buyers may have their eyes on certain properties but they don’t want to commit at the auctions, hoping that the properties may be put up again at a lower price. Some may even try to approach the auctioneer to make their offers after the auctions,” he said.
“Source:[More prime district home owners defaulted on loans in 2019] © Singapore Press Holdings Limited. Permission required for reproduction”
