More homes put up for fire sale as borrowers default

http://www.straitstimes.com/archive/...fault-20141213

More homes put up for fire sale as borrowers default

Published on Dec 13, 2014 1:03 AM

By Cheryl Ong


MORE property owners are defaulting on their home loans as the number of properties put up for mortgagee sale has reached its highest level in five years.

The situation is likely to worsen amid weak demand for property. Cooling measures have hammered buying sentiment and a deluge of new units threatens to flood the leasing market.

In all, 159 properties were put up for fire sale this year - five times the 32 units last year, according to Colliers International.

While this was still well below the 270 mortgagee listings in 2008 amid the financial crisis, this year's tally was the highest since 2010. Homes are put up for mortgagee sale when financial institutions try to recover their losses after a borrower defaults on a loan.

"In addition to buyers having to fork out a higher cash outlay with measures such as the additional buyers' stamp duty and total debt servicing ratio in place, there are also concerns of a mounting supply of residential units and an impending increase in interest rates," said Ms Annie Chan, director of auctions and sales at Colliers.

About 78,400 new private homes are expected to be completed by 2018, official data shows. Vacancy rates crept up to 7.1 per cent in the third quarter - the first time since 2006 that they have exceeded 7 per cent.

Heightened leasing competition has led a string of landlords to accept lower rents. "The falling yields as a result of the softer rental market have also deterred investors from committing to a purchase," said Ms Chan.

The impact has been most pronounced in the luxury segment, where 51 private apartments were up for mortgagee sale, including in projects like The Sail @ Marina Bay and Orchard Scotts.

Foreigners have shied away from the market since a hefty tax of 15 per cent was levied on their purchases in January last year.

But even homes in the suburbs have not been spared from the downturn as 53 units were offered at fire sale prices. These came from The Medley in Telok Kurau, Ris Grandeur in Pasir Ris, and Haig Court in Haig Road.

Shoebox units in the suburbs were hit as well: Nine such apartments were put up for mortgagee sale.

Owners unable to secure tenants or who had to accept lower rents could have found it "a stretch" to pay for their home loans, said Ms Chan.

"Owners holding multiple properties may experience a further cash crunch," she said.

The value of properties that will go under the hammer next year is estimated to fall between $70 million and $80 million, in line with the $72.5 million from the 32 units sold this year.

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