Fewer homes put up for auction in Q1, interest switching to shophouses: Knight Frank

High-rise private apartment condominiums in the Scotts Road and Cairnhill area.
High-rise private apartment condominiums in the Scotts Road and Cairnhill area. PHOTO: ST FILE

SINGAPORE - A total of 141 properties were put up for auction in the first quarter of the year, with residential properties accounting for a lion's share of the listings.

In a report out on Wednesday, real estate consultancy Knight Frank said it is the first time that the number of auction listings fell below 150 since the fourth quarter of 2014.

Of those that were placed for auction in the first quarter, 85 were residential properties. This was fewer than the 118 units in the last three months of 2015.

Ms Sharon Lee, director and head for auction at Knight Frank Singapore said the number of residential properties put up for auction is generally lower in the first quarter due to the Chinese New Year holidays.

"Sellers could possibly be more caught up with the festivities or travelling during this period", Ms Lee added.

However, the figure will likely go up in the coming quarters, due to the weak economic outlook, falling rental, rise in interest rate and oversupply of completed residential properties in 2016.

In the first quarter, Knight Frank said 25 homes in the prime districts of 1, 9, 10 and 11 were placed on the block, down 24.2 per cent from the 33 units a year ago.

It added that 12 units were under mortgagee sale, representing 48 per cent of homes in the prime districts that were up for auction.

Listings for mortgagee sales occur when a bank puts a property up for auction after its owner defaults on servicing the home loan.

It noted that more properties in the prime districts could go under the hammer "against the backdrop of anaemic economic growth coupled with the impending threat of interest rate hike".

"Landlords who are highly leveraged could be facing difficulties in servicing their mortgage loans amidst the slow leasing market, particularly property owners of higher-priced prime properties", Knight Frank said in the report.

Of the 85 homes that were listed for auction, only two were successfully sold. This translated to a success rate of 2.4 per cent, the lowest since the fourth quarter of 2013, Knight Frank observed.

"The shift in buyers' preference from residential properties to shops & shophouses or industrial properties could be due to the tendency to avoid the Additional Buyers' Stamp Duty, which only applies to the residential sector."

The two residential properties that were sold were: a 1,539sqft apartment at Serenade@Holland condominium at SS$1.7 million and a 1,679 sqft unit at Rio Casa in Hougang Avenue 7 for SS$840,000.

In contrast, four out of 27 shops and shophouses that were put up for auction were sold; while two industrial properties out of 22 listed found buyers.

The shops & shophouses sector achieved a total sales value of S$5.5 million to overtake the residential sector, with overall sales value at S$2.5 million.

The total of eight properties that were successfully auctioned in the first quarter achieved a combined sales value of S$9.6 million, down from S$10.8 million in the previous quarter and S$35.8 million in the first three months of 2015.

Knight Frank attributed the decrease in sales value to an absence of "big-ticket transaction" during the first quarter.

"Properties below S$2.5 million formed the bulk of the transactions in Q1 2016. With potential buyers' ability to leverage constrained by the Total Debt Servicing Ratio (TDSR), this price quantum is likely to remain a sweet spot for the auction market", the consultancy said.

It expects the total number of properties put up for auction in the first half of the year to cross the 300-unit mark, as auction having gained acceptance and popularity as a viable way to market properties.

wongsy@sph.com.sg