Singapore property auction listings likely to gain pace as rates rise

Singapore property auction listings likely to gain pace as rates rise

Market watchers point to combination of expiring government credit support, cooling measures and higher mortgage rates

Jan 12, 2022

MORE properties in Singapore could go under the hammer this year, amid rising interest rates and the expiry of relief measures for borrowers.

Figures from Knight Frank showed that the property auction market was active in 2021 with a total of 670 listings - including repeat listings but excluding properties sold outside of auction - up 35.4 per cent from 2020's tally.

This translated into an improved success rate of 4.8 per cent during auction last year, more than the 3.6 per cent in 2020.

Sharon Lee, head of auction and sales at Knight Frank Singapore, said: "Strong buying sentiment in the auction market has been fuelled by both owner-occupiers and pandemic-era investors on the lookout for investible products at a bargain, with certain real estate classes under stress during the Covid-19 pandemic." She added that the economic recovery and buyers' optimism also contributed to last year's higher success rate.

Joy Tan, Edmund Tie senior director and head of auction and sales, observed the auction sector in 2021 posting a "healthy recovery from the Covid-depressed year of 2020", as the economy reopened and employment rates rebounded.

She described 2021 as a "curious year" for property auctions in general as it defied expectations of a soft, pandemic-hit market.

That said, there was a slowdown in the number of mortgagee sale listings put up for auction last year. Tan attributed this to the mortgage deferment schemes offered by the Monetary Authority of Singapore and the financial industry, as well as a healthy secondary market that enabled owners to sell their properties before bank repossession.

Auction listings are made up mainly of mortgagee and owner sales.

Activity in the auction market has been muted in recent weeks due to the year-end festive season and as buyers gear up to return to the office and ready their children for the new school year, Tan from Edmund Tie noted. "It has thus been on the quieter side since December 2021," she said.

In addition, the hike in additional buyer's stamp duty (ABSD) rates for second and subsequent residential properties as well as all foreigners' purchases, under the Dec 16 round of property cooling measures, has mellowed buying sentiment. "Most prospects are now adopting a wait-and-see attitude to evaluate the market situation," Tan said.

Lee from Knight Frank said buyers may try to lock in interest rates before the gradual hike in rates in the latter half of 2022. Moreover, some buyers are expecting prices of homes to level off this year and match their price expectations, as a result of the new cooling measures.

For non-residential properties, investors "might be keen to secure some of these strata-commercial or shophouse assets before the possible spillover effects from the residential segment lead to further price increases", Lee added.

Auctioneers and analysts reckon more properties will be listed for auction this year, with interest rates creeping up and as the government's extended credit support measures end.

Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies at the National University of Singapore, said more homes could be put on the market, given that the application window for borrowers to seek reduced instalment payments for property loans expired on Sep 30, 2021. Those borrowers have also had to resume full loan instalment repayments after Dec 31, 2021. Furthermore, when interest rates increase, "some borrowers may be caught in a bad situation", he noted.

And as overall buying interest is expected to dampen in the wake of the cooling measures, distressed properties are more likely to be put up for auction, instead of via private negotiations, Dr Lee said.

He thinks this year's auction success rate could ease from last year's, and properties might also take a longer time to sell.

Meanwhile, the Knight Frank team predicts the Singapore auction market to achieve a success rate of about 5 per cent this year, similar to last year's 4.8 per cent.

Tan from Edmund Tie said the first half of the year will likely remain quiet as the residential segment adjusts to the new cooling measures, before activity resumes in Q3 2022.

As for commercial properties, they remain in strong demand as they are not affected by the ABSD regime, she added.