Mortgagee sales surge amid weak leasing market

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Mortgagee sales surge amid weak leasing market

Published on Dec 24, 2014 1:05 AM

By Rennie Whang


THE number of mortgagee sale listings shot up this year in the wake of the lacklustre leasing market.

There have been 150 listings of mortgagee sales this year, up from just 32 last year.

The increase is being blamed on the weak leasing market, which has made it harder for borrowers to finance their mortgages, said Ms Mok Sze Sze, head of auction and sales at JLL.

Century 21 chief executive officer Ku Swee Yong added that investors may also be choosing to walk away from their loans amid poor rental demand.

In another sign of the distressed market, mortgagee sales listings comprised an average of 39 per cent of all residential auction listings this year - up from only 6 per cent last year - and is the highest in at least five years, said Ms Mok.

The proportion of mortgagee sales listings was at 19 per cent in the first quarter, 53 per cent in the third quarter and 46 per cent in this three-month period.

"In 2015, the auction market is likely to see more sales listings put up by mortgagees, with a moderate increase (from this year)," said Ms Mok.

Most of the listings are expected to be non-landed homes in prime areas and landed homes in the suburbs.

Ms Mok also noted that the value of auction sales has dropped this year.

The total value of auctioned properties has hit $72.5 million so far this year, about 27 per cent down from $99.6 million recorded for all of last year.

The value of sales recorded in this quarter has been $13.7 million, 251 per cent ahead of the same period last year, but down 57 per cent from the third quarter.

The quarterly dip was mainly due to the large quantum in the third quarter, which had been boosted by two big-ticket transactions.

One was the sale of a freehold residential site off Brighton Crescent for $9.1 million in September.

Homes have been selling faster as well, with 90 per cent of properties going under the hammer this quarter able to find a buyer at the first auction.

That is up from 54 per cent in the second quarter and 80 per cent in the third.

This is due to compromises from buyers and sellers, said Ms Mok.

"Sellers are now more willing to lower price expectations in light of the weaker market conditions, whereas from the buyers' perspective, (factors like) the expected rise in interest rates in the immediate horizon could have encouraged these purchases," she added.

The pace of auction sales next year is expected to be similar to this year's, with prices tipped to decline slightly, Ms Mok said.

The softer leasing market has not appeared to deter buyers' investment sentiments.

Last year, 57 per cent of properties sold were on a vacant possession basis.

This year, it was 81 per cent.

"This shows that purchasers have taken the downside risks into account and that the potential gain from the investment outweighs the risks," said Ms Mok.

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Pace of property sales at auctions quickens in fourth quarter: JLL

By Lynette Khoo

[email protected]@LynetteKhooBT

24 Dec


THE pace at which properties are sold under the hammer has quickened in the fourth quarter, according to a new analysis on auction sales.

More properties are sold at their first listing in auctions this year, as a narrowing expectation gap on prices between sellers and buyers spurred quicker sales, JLL says.

The property consultancy said the proportion of properties (by sales value) sold during their first auction listing has increased in the past three quarters to 90 per cent in the fourth quarter, up from 80 per cent in the third quarter and 54 per cent in the second quarter (see infographic).

JLL reckons that the faster pace of sales this year is due to both buyers and sellers making compromises and converging in their price expectations.

"Sellers are now more willing to lower price expectations in light of the weaker market conditions, whereas from the buyers' perspective, the anticipation of a potential relaxation of cooling measures alongside the expected rise of interest rates in the immediate horizon could have encouraged these purchases," JLL says in its report.

Based on its data, the total value of sold properties at auctions was S$13.7 million in the fourth quarter, representing a 251 per cent year-on-year surge and a 57 per cent quarter-on-quarter decline. But the drop from a quarter ago was due mainly to two big-ticket items sold in the third quarter that made up almost half of the total sales value in that quarter.

For the full year, the total sales value of properties sold at auctions stood at S$72.5 million, down 27 per cent from that in 2013. Mortgagee sales - forced sales by financial institutions to recover their losses from defaulted loans - made up half of the total sales value this year.

According to JLL's data, sales at JLL auctions accounted for 33.3 per cent of the market, while Colliers International was a close runner-up with a 31.2 per cent market share.

JLL head of auction and sales Mok Sze Sze noted that a steady rise in mortgagee sales in recent quarters also contributed to higher success rate of sales at auctions. She is expecting the pace of sales at auctions next year to be similar as property prices are expected to decline moderately.

"We noticed that the softer leasing market has not deterred buyers' investment sentiments," she added. "Last year, 21 properties were sold, with 12 or 57 per cent sold on a vacant possession basis. This year, the percentage of sales on a vacant possession basis has increased to 81 per cent. This shows that purchasers have taken the downside risks into account and that the potential gain from the investment outweighs the risks."

Most consultants are expecting more properties to be put up for auction next year, led by an expected surge in mortgagee sales when rising interest rates start hurting borrowers' ability to service their loans and more supply of completed homes further weaken the rental market.

Ms Mok is projecting that condos in the prime areas and landed homes in the suburbs will form the bulk of auction listings next year.

Knight Frank head of auctions Sharon Lee flagged last week that there could also be more mortgagee sales of strata-titled factories that were bought in recent years.

The residential segment is still likely to take up the lion's share of auctioned properties in 2015, according to consultants, after the segment has accounted for some 72 per cent of total sales value in the fourth quarter based on JLL's data.

Some 46 per cent of residential sales listings were mortgagee sales in the fourth quarter, up from 19 per cent in the first quarter and a quarterly average of 6 per cent for 2013.