Published December 13, 2012

Going, going . . . but not totally gone

Auction market sees lowest sales value in 15 years, less than 10% sold

By Felda Chay

SINGAPORE'S property auction market had a quiet year, chalking up its lowest sales value in 15 years and selling barely one-tenth of the properties put up for auction, as a result of the government's property curbs.

Property consultancy Colliers International said yesterday that just 24 out of a total of 377 properties - across various sectors such as residential, retail and industrial - that were put up for sale ultimately changed hands. The total sales value of these properties was $62.4 million, down 35 per cent from the $95.6 million recorded last year.

This year's sales value was 54 per cent lower than the $135.7 million achieved during the Asian financial crisis of 1998, and 25 per cent lower than the $83.7 million during the global financial crisis in 2008.

Colliers expects the market to perform just slightly better next year, and forecasts the sales value at property auctions next year to reach about $70 million, as ample liquidity and low interest rates continue to fuel the sellers' market in the first half of 2013.

"Nonetheless, buyers will continue to search for value buys in the auction market, as properties are still considered as a good hedge against the inflation rate, which was at a high of 5.2 per cent in 2011 and averaged at 4.7 per cent from January to October this year," said Colliers' deputy managing director, Grace Ng.

"There will still be strong interest in landed properties, as well as opportunistic purchase of properties that are located in prime areas, such as Districts 9, 10 and 11.

"Meanwhile, if the business environment deteriorates or the unemployment rate increases next year, there is a possibility of a higher number of mortgagee sales in the second half of 2013.

"Some industrial properties may emerge as mortgagee sales, when more small and medium enterprises face the pressure of rising costs and a challenging business environment."

Ms Ng noted that the auction sales this year had been hit by a series of cooling measures that were implemented by the government in the residential sector.

These measures "resulted in a lacklustre secondary residential market and thinner interest in the high-end/luxury residential market", she said.

In particular, the high- end market has been badly hit by the introduction of the Additional Buyer's Stamp Duty (ABSD) last December, which was aimed at taking some steam out of the private residential property market here and targeted non-PR foreigners and corporations in particular. These two categories of buyers have to pay the highest ABSD rate of 10 per cent on any residential property purchase.

In the secondary residential market, a stalemate has been playing out between buyers and sellers.

Said Ms Ng: "We observe that owners have been reluctant to sell their properties, unless the prices fetched could possibly enable them to make another property investment. Besides, sellers now have strong holding power due to the prevailing low interest rates, as well as healthy leasing activities seen in the mass residential sector that has enabled them to service their loans.

"Buyers, on the other hand, have also been reluctant to commit to high prices for properties in the secondary market due to a run-up in prices since 2009. Instead, they have adopted a "wait-and-see" attitude - in the hope of a price adjustment, in view of the continued implementation of the government's cooling measures, eurozone crisis and the impending slowdown in GDP growth."

Residential properties continued to account for the lion's share of auction sales, with $29.7 million or 48 per cent of total sales coming from this segment, said Colliers.

For retail properties, the total sales value at auctions this year was $8.1 million, down 79 per cent from last year, even though they are typically sought after by investors for their higher yields. Industrial space recorded total auction sales of $10.1 million.

"The continued high sale value of industrial properties at auctions is attributed to the investors' diversion to the commercial and industrial market due to the rigorous cooling measures in the residential market," said Colliers.