reporter2
26-04-19, 23:25
Mortgagee listings hit new high on loan rate hikes, weak rentals
Knight Frank believes worst is not over; its Q1 data also shows poor auction sales
Thu, Apr 25, 2019
MORTGAGEE sale listings in Singapore reached a record high in the first quarter of 2019, according to data compiled by Knight Frank.
Out of 362 auction listings, 159 were mortgagee sale listings, the highest ever recorded in Knight Frank's database stretching back to Q1 2011. The mortgagee listings were up 28.2 per cent from the previous quarter, and doubled from a year ago.
More than half came from the residential sector, but businesses also showed signs of strain, with industrial listings up more than five times year-on-year to 39 and retail listings more than doubling over the same period to 32.
Forty-five were fresh listings, up 18.4 per cent from the previous quarter and up 28.6 per cent year-on-year. The remaining 114 listings were rolled over from the previous quarters.
Knight Frank said some factors contributing to the increase were higher mortgage payments due to rising interest rates, coupled with a subdued rental market. More distressed owners were also unable to dispose of properties quickly post-cooling measures.
Lee Nai Jia, head of research at Knight Frank Singapore, told The Business Times that the increase in industrial listings appeared to stem from the generally difficult business environment, as no trend was observed from specific sectors or groups.
Among the retail listings, many were smaller units purchased at per square foot prices as high as S$3,000, in locations with low traffic.
"When they try to let the spaces out, it's very difficult because the space is small and the location doesn't support the trade. Even moneychangers and takeaway kiosks find it hard to survive in such developments," Dr Lee said. As a result, owners have to slash rents or are unable to find occupants, and over time struggle to clear their loans.
He added that the increase in retail mortgagee listings lags a period about five or six years ago, when there were high volumes of speculative buys for such properties.
Meanwhile, residential mortgagee sales tend to follow the business cycle, often tracking retrenchment exercises, Dr Lee said.
Barclays economist Brian Tan said: "The huge spike in mortgagee sales indicates that where we are in the property market is not very sustainable, and many people have become overstretched. It does provide some justification for why the government decided to step in (with the cooling measures). If the market had been allowed to continue as it was, we might have run into some problems."
OCBC economist Selena Ling noted that while domestic interest rates have been climbing steadily since 2016, they appear to be stabilising just below the 2 per cent pressure handle since late February 2019. As such, pressure on the local property market on this front may be capped.
"That said, the ongoing cooling measures and the overall lacklustre growth backdrop, coupled with rising supply in coming quarter/years for the private residential market, may mean that price pressures are still likely to be on the downside for now," Ms Ling said.
The trend could continue to play out in the quarters ahead, she said, noting that mortgagee sales are usually a lagging indicator arising when owners have exhausted all means to service mortgage loans and have no choice but to offload them.
Dr Lee concurred: "Together with the slowing manufacturing sector and volatile equity markets, we foresee an increase in the number of mortgagee listings ahead."
At the same time, the success rate for mortgagee listings dived to 2.5 per cent from 10.7 per cent in Q1 2018, and dipped from 4 per cent in the previous quarter. Dr Lee attributed this to a mismatch in price expectations, and said that success rates tend to be higher when the market is hot or prices are on an uptrend.
Properties that attracted no bids would be relaunched for sale at a later date or put up for sale under private treaty, he added.
Five properties went under the hammer in Q1 2019, the same as in the previous quarter, with gross sales value more than doubling quarter-on-quarter to S$11.6 million. However, the sales value was 42.1 per cent lower compared to a year ago.
The number of landed and non-landed residential properties in the prime districts of 9, 10 and 11 that were listed for auction was 48. Among these, 20 units came under mortgagee sale listing.
There were two mortgage sales listings in Sentosa Cove in Q1 2019, as well as five owner sales listings. The highest number of listings recorded in a year for Sentosa Cove was nine mortgagee sales listings in 2016.
Amendment note: A previous version of this story incorrectly stated the amount by which industrial and retail listings and gross sales value increased. The article has been revised to reflect the correct figures.
Knight Frank believes worst is not over; its Q1 data also shows poor auction sales
Thu, Apr 25, 2019
MORTGAGEE sale listings in Singapore reached a record high in the first quarter of 2019, according to data compiled by Knight Frank.
Out of 362 auction listings, 159 were mortgagee sale listings, the highest ever recorded in Knight Frank's database stretching back to Q1 2011. The mortgagee listings were up 28.2 per cent from the previous quarter, and doubled from a year ago.
More than half came from the residential sector, but businesses also showed signs of strain, with industrial listings up more than five times year-on-year to 39 and retail listings more than doubling over the same period to 32.
Forty-five were fresh listings, up 18.4 per cent from the previous quarter and up 28.6 per cent year-on-year. The remaining 114 listings were rolled over from the previous quarters.
Knight Frank said some factors contributing to the increase were higher mortgage payments due to rising interest rates, coupled with a subdued rental market. More distressed owners were also unable to dispose of properties quickly post-cooling measures.
Lee Nai Jia, head of research at Knight Frank Singapore, told The Business Times that the increase in industrial listings appeared to stem from the generally difficult business environment, as no trend was observed from specific sectors or groups.
Among the retail listings, many were smaller units purchased at per square foot prices as high as S$3,000, in locations with low traffic.
"When they try to let the spaces out, it's very difficult because the space is small and the location doesn't support the trade. Even moneychangers and takeaway kiosks find it hard to survive in such developments," Dr Lee said. As a result, owners have to slash rents or are unable to find occupants, and over time struggle to clear their loans.
He added that the increase in retail mortgagee listings lags a period about five or six years ago, when there were high volumes of speculative buys for such properties.
Meanwhile, residential mortgagee sales tend to follow the business cycle, often tracking retrenchment exercises, Dr Lee said.
Barclays economist Brian Tan said: "The huge spike in mortgagee sales indicates that where we are in the property market is not very sustainable, and many people have become overstretched. It does provide some justification for why the government decided to step in (with the cooling measures). If the market had been allowed to continue as it was, we might have run into some problems."
OCBC economist Selena Ling noted that while domestic interest rates have been climbing steadily since 2016, they appear to be stabilising just below the 2 per cent pressure handle since late February 2019. As such, pressure on the local property market on this front may be capped.
"That said, the ongoing cooling measures and the overall lacklustre growth backdrop, coupled with rising supply in coming quarter/years for the private residential market, may mean that price pressures are still likely to be on the downside for now," Ms Ling said.
The trend could continue to play out in the quarters ahead, she said, noting that mortgagee sales are usually a lagging indicator arising when owners have exhausted all means to service mortgage loans and have no choice but to offload them.
Dr Lee concurred: "Together with the slowing manufacturing sector and volatile equity markets, we foresee an increase in the number of mortgagee listings ahead."
At the same time, the success rate for mortgagee listings dived to 2.5 per cent from 10.7 per cent in Q1 2018, and dipped from 4 per cent in the previous quarter. Dr Lee attributed this to a mismatch in price expectations, and said that success rates tend to be higher when the market is hot or prices are on an uptrend.
Properties that attracted no bids would be relaunched for sale at a later date or put up for sale under private treaty, he added.
Five properties went under the hammer in Q1 2019, the same as in the previous quarter, with gross sales value more than doubling quarter-on-quarter to S$11.6 million. However, the sales value was 42.1 per cent lower compared to a year ago.
The number of landed and non-landed residential properties in the prime districts of 9, 10 and 11 that were listed for auction was 48. Among these, 20 units came under mortgagee sale listing.
There were two mortgage sales listings in Sentosa Cove in Q1 2019, as well as five owner sales listings. The highest number of listings recorded in a year for Sentosa Cove was nine mortgagee sales listings in 2016.
Amendment note: A previous version of this story incorrectly stated the amount by which industrial and retail listings and gross sales value increased. The article has been revised to reflect the correct figures.