More owners put properties under hammer in weak market

The lacklustre real estate sector is prompting more owners to try their hand at auctions.
The lacklustre real estate sector is prompting more owners to try their hand at auctions. PHOTO: ST FILE

The lacklustre real estate sector is prompting more owners of residential and industrial properties to try their hand at auctions.

There were 180 units put under the hammer in the three months to June 30, up 2.9 per cent from the first quarter and 45.2 per cent more than in the same period last year, according to Knight Frank Singapore yesterday.

It noted there were 42 mortgagee auctions - when mortgagees try to sell the asset they gained control over after the mortgagors of these assets defaulted - in the quarter, down 22.2 per cent from the first three months of the year.

There were 39 industrial properties put up for auction, 85.7 per cent more than in the first quarter, with 89.7 per cent of this being strata-titled industrial space. Owners of these units have found it difficult to lease their premises at expected rates as more industrial units are completed.

Owners of smaller units - one- and two-bedders - put 27 flats under the hammer, up 28.6 per cent on the first quarter.

Knight Frank said such owners were struggling to generate the rental income required to meet mortgage payments. Of the four shoebox units - those that are up to 506 sq ft - that went up for auction, three were being sold by mortgagees after the owners defaulted.

It added that shoebox rentals faced pressure from the increasing number of private home completions, and that their appeal as investments may be waning.

While more properties went up for auction, only seven - five residential and two industrial - properties were sold, a fall of 36.4 per cent from the first quarter and a drop of 22.2 per cent on the same quarter last year.

The auction success rate in the second quarter was 3.9 per cent, down from 6.3 per cent in the previous three months.

Knight Frank said auction sales values fell 72.1 per cent to $10 million from the first quarter, possibly due to the June school holidays.

It added that the decrease could also be due to potential buyers preferring to negotiate privately with the sellers after the auctions.

The wide disparity in price expectations of buyers and sellers might also be a factor. Knight Frank expects more owners to explore auctions in this half of the year.

It also expects to see more mortgagee listings, as owners find it harder to service their loans amid "continually weak market sentiment and increase in interest rates". More strata-titled industrial units are likely go on auction as owners face difficulties with leasing. Purchases could increase as sellers may become "more realistic in their price expectations amid weakening marketing conditions".

A version of this article appeared in the print edition of The Straits Times on July 09, 2015, with the headline 'More owners put properties under hammer in weak market'. Print Edition | Subscribe