Colliers International , Singapore

The Singapore property auction market witnessed a heartening turnaround in the total value of properties sold in 1H 2009.  A total of S$72.39 million worth of properties were transacted in the first six months of the year.  This is an encouraging 61 per cent jump in sales – particularly in times of economic uncertainty like now – from the S$45 million recorded in 2H 2008 and 87 per cent from the S$38.64 million in 1H 2008.

Ms Grace Ng, Deputy Managing Director (Agency and Business Services) and Auctioneer, says, “In line with the recent stock market rally, the turnaround began in March 2009, which saw the total sale value soar to S$13 million from a mere S$1.4 million and S$3.6 million registered in February and January 2009, respectively. 

In 1Q 2009, sales were lacklustre as the prices offered by buyers were low and opportunistic, compared to owners’ asking prices.  However, the situation changed dramatically beginning end March 2009 when the stock market rallied.  With market sentiments improving, the sales figure in June 2009 has outshone the other months, totalling at S$24.7 million.  This is higher than the S$17.9 million worth of sales chalked up in the first quarter of 2009.

Based on historical observations, property auction has always been an accurate barometer of market confidence, and is usually swift in reflecting any changes in market sentiments. This is evidenced during the sub-prime crisis in August 2007, during which transactions at auctions plunged and sales value plummeted from S$55 million in July 2007 to just S$10.79 million in August 2007, within a month.”

Three in Four Properties Put Up For Auction Are Owners’ Sale 
The proportion of properties put up for auction sale by owners in 1H 2009 remained high at 77 per cent, which is comparable to 2H 2008 which stood at 76 per cent. 

Ms Ng observes, “Historically from 1998 to 2006, the number of mortgagee properties had always trend higher than the number of properties put up by owners.  The trend starts to reverse in 2007, with owners’ sale chalking up a larger proportion of the pie and has since been trending up.  This again reinforces that auction has become an acceptable and popular mode of sale among property owners due to its systematic procedure and quick process.”

Mortgagee Sale Remains Low Compared to the 1998 Asian Financial Crisis
In 1H 2009, mortgagee sale represented about 23 per cent of the total properties put up for auction.  Comparing with 2H 2008, the number of mortgagee sale in 1H 2009 did not register any significant change. There were only 103 mortgagee properties seen at auctions in 1H 2009, which was just marginally higher than the 102 in 2H 2008.

On average, the number of mortgagee properties seen in 1H 2009 is only about half of what was put up during the last Asian Financial Crisis.  In 1998, there were a total of 452 mortgagee properties being put up for auction, which translates to an average of 226 mortgagee properties per half year.

Ms Ng comments, “The continued low number of mortgagee sale could be partly attributed to financial institutions attempting to manage their distressed asset portfolio by giving property owners the opportunity to dispose the property on their own accord.  There will be less contention over the sale price, as the price is determined through a consultation process with the owner. 

Another reason could be the six-month lag time between when a property owner defaults on his loan and when the property is repossessed by the bank and put up in the market for auction sale. Hence, such properties may only surface in the market in the second half of 2009.”

Sectoral Performance – Highlights
The S$72.39 million sale value seen in 1H 2009 is mainly boosted by the sale of residential properties, which make up approximately 48 per cent (S$34.74 million) of the total sale value.  The industrial sector is the second highest, with S$13.46 million worth of transactions and representing approximately 19 per cent of the total value of properties sold. 

Due to improved market sentiments propelled by the stock market rally, coupled with pent-up demand and opportunistic buying as property prices had corrected about 21 per cent from the peak in mid-2008, the auction market has witnessed buyers streaming back into auction halls.

Ms Ng observes, “The number of attendees at auction has increased significantly since the beginning of this year – with many owner occupiers and investors jam-packing the auction room and spilling outside the doorways, as everyone searches for distressed properties and good buys at auction sales.

It is also interesting to note that nowadays, the response to a property significantly doubles once it is listed for auction.  While many vendors are listing various types of properties – including landed properties, condominiums and shop units, among others – for auction sale, many owner-occupiers have also requested to be put on the auction mailing list so that they could keep track of auction sales.”

Residential
Ms Ng says, “The first wave of buying came from owner occupiers who had entered the market to seek mass market properties – especially given that there is tremendous liquidity in the market now as bank interest rates had fallen to a paltry level of less than one per cent.  The buying momentum continued in May and June, which by then, has filtered to landed and even high-end properties.”

Mass-market properties that were sold at auctions included apartments at Kentish Lodge (Rangoon) sold at S$620,000, Bayshore Park (East Coast) at S$600,000, Parkwest (West Coast) at S$930,000 and Jasmine Court (Upper Thomson Road) at S$580,000 and S$850,000.  Apartments in the city fringe sold included Birmingham Mansion (Novena) at S$1.06 million and Parkshore (Tanjong Rhu) at S$1 million. 

Meanwhile, significant landed properties sold include a semi-detached house at Namly Garden (Sixth Avenue) for S$3.7 million, a detached house at Bright Hill Crescent (Upper Thomson) for S$4.1 million, and a 7,232 sq ft land at Fernhill Road (Stevens Road) for S$6.4 million.  The high-end properties sale included two apartments at The Clift for S$605,000 and S$1.047 million, an apartment at Orchard Towers (Orchard Road) for S$1.9 million, as well as an apartment at Leonie Towers (River Valley) for S$3.45 million. 

Industrial
Significant industrial properties sold at auctions in 1H 2009 included a JTC factory at Gul Road for S$3 million and a JTC factory at Tuas West Avenue for S$3.53 million.

Outlook
Ms Ng concludes, “It is expected that more mortgagee sale will enter the market in 2H 2009 due to the general lag time of approximately six months or more.  However, the total number of mortgagee sale for the whole of 2009 is likely to be lower than that seen in 1998.  We foresee that there will be less than 300 of such properties in 2009, as compared to 452 mortgagee properties registered in 1998. 

Positive sentiments are expected to continue and the buying momentum to persist in the next few months. Hence, sale value will remain high and average monthly figure may surpass S$30 million in some months.  Consequently, the whole of 2009 may witness a total sale value exceeding S$160 million, which is almost twice of the S$83.67 achieved in 2008.”

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 12,700 employees span the world in 294 offices in 61 countries. On a worldwide basis, Colliers manages 1.1 billion square feet, and has revenue of $US 1.6 billion.

Contact Information

Ms Seah Li Ching
Assistant Manager, Marketing & Communications
Tel: 65 6223 2323
Direct: 65 6531 8545

Ms Grace Ng
Deputy Managing Director (Agency and Business Services)
Tel: 65 6223 2323
Direct: 65 6531 8500

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