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Real estate auction market sees increase in mortgagee listings amid uncertain economic outlook

by • November 6, 2018 • Research and AnalysisComments (0)100

A real estate auction market research by Knight Frank Singapore said that the total number of auction listings (excluding properties sold before and after auctions) amounted to 291 in Q3 2018, translating to a 7.4% quarter-on-quarter (q-o-q) increase of listings from the 271 listings in Q2 2018.

The real estate auction market success rate (based on total number of listings) inched downwards from 3.7% in Q2 2018 to 3.1% in Q3 2018, with some 9 properties sold during auctions.

The value of sales in the real estate auction market for Q3 2018 decreased 43.5% q-o-q to approximately to S$10.4 million.

real estate auction marketThe real estate auction market key trends as published in Knight Frank’s research showed that there were 151 owner sale auction listings, about 7.9% lower q-o-q than the 164 listings recorded in the previous quarter. This is largely due to the Hungry Ghost Month that spanned from 11 August to 9 September.

Total number of mortgagee sale listings in the auction market increased to 109, a 31.3% increase q-o-q in Q3 2018. Heightened uncertainty in the global economy, increased volatility in the various asset markets, and restructuring of various sectors taking place in Singapore contributed to the higher number of listings, said Knight Frank.

Residential listings formed a significant share of all the auction listings in Q3 2018 (45.4%), followed by industrial listings (29.9%), and retail listings under auctions (17.9%). The number of residential listings in the auction market increased q-o-q, from 109 residential listings in Q2 2018 to 132 residential listings in Q3 2018. Although the number of residential listings increased 21.1% q-o-q, the number of residential properties sold dropped from 8 residential properties in Q2 2018 to 5 properties in Q3.

The drop in the real estate auction market may be due to the cooling measures, as buyers has lower expectations of prices.

Sharon Lee, Senior Director & Head of Auction at Knight Frank Singapore said: “With the recently inked cooling measures, properties will take longer to sell via private negotiation due to the mismatch of expectations. Thus, we anticipate more owners turning to auctions to expedite the sale of their properties. Separately, the owners can better evaluate their position through the bids.”

The Knight Frank report noted that total industrial listings in Q3 3018 continued to trend higher, increasing by 61.3% q-o-q to 87 listings. Majority (65.5%) of the industrial listings were units of sizes less than 5,000 sq ft. This is likely a result of industrial unit owners hoping to offload their assets as the price quantum is deemed relatively affordable for buyers.

The number of retail units listed under auctions stabilized in Q3 2018 to 52 listings after a spike of 97 retail listings recorded in Q2 2018. Retail units listed under owner sale accounted for a large share (61.5%) of retail listings in auctions amid headwinds facing owners in the retail sector.

Out of the residential auction listings, the proportion of residential properties listed under owner sales and mortgagee sales this quarter stayed largely unchanged at about 43.2% (57 owner listings) and 43.9% (58 mortgagee listings), said the research report. In Q3 2017, the proportion of residential listings under mortgagee sale in the property auction market was about
58.1% (68 auction listings) while owner sales accounted for 35.0% (41 auction listings).

The success rate of residential sales in the real estate auction market declined to 3.8% in Q3 2018 from the 7.3% achieved in the previous quarter. Total transaction volume of residential properties sold under auctions summed to S$7.8 million. On a q-o-q basis, the total residential sale volume through auction declined 54.5% q-o-q as fewer residential properties were transacted.

The number of residential property listings in prime districts (comprising districts 1, 9, 10, and 11) in Q3 remained at 25 listings, unchanged from the previous quarter. Some 29 residential listings were from district 15 (Katong, Joo Chiat, Amber Road) in Q3 2018, highest since data was collected from 2011. Majority (72.4%) of the private home listings located in district 15 was put for sale by owners.

Average price quantum of residential units transacted in Q3 2018 declined 27.3% q-o-q to S$1.6 million from an average transacted quantum of S$2.1 million in Q2 2018. Only 1 out of the 5 residential units, a landed home, was transacted in Q3 was above S$2.0 million. In comparison, Q2 2018 saw 4 out of 8 residential properties transacted above S$2 million.

The Knight Frank real estate auction market research report said that it keeps its forecast that the number of auction listings under owner sales to increase towards the end of 2018. Notwithstanding, external shocks may be coming from the ongoing trade war and rising oil prices can lead to increase in mortgagee listings.

The report said that success rate for residential listings is likely to ease, as there is a growing gap in price expectations between buyers and sellers. It added that notwithstanding, choice properties that are likely to come by continue to remain in demand. While commercial listings, comprising office, industrial and retail units, it remains premature to conclude whether the increase in interest due to the cooling measure will translate to more sales.

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