Jun 25, 2014

    More repossessed properties being put up for auction

    THE number of properties up for auction by mortgagees (lenders) as well as their share of the number of properties going under the hammer has hit a quarterly high in Q2.

    Auctioneers say this reflects the difficulty that financially stretched borrowers face in securing buyers for their properties since the implementation of the total debt servicing ratio (TDSR) framework a year ago. Because of this, financial institutions have had to repossess more properties and put them up for auction.

    The trend is expected to gain momentum as the rising supply of non-landed private homes will make it harder for mortgagors (borrowers) to find buyers and thus dispose of their properties themselves - resulting in more properties ending up as mortgagee sales.

    Also, the reduced inflow of expats into Singapore is shrinking the pool of potential tenants, hitting rental incomes and hurting owners' ability to service their loans.

    Figures from Colliers International show that this quarter, 42 mortgagee-sale properties have been put up for auction - almost double the 22 in Q1 this year. In Q2 last year, the figure was just six properties.

    The latest figure is the highest since Q3 2009, when 63 mortgagee-sale properties landed on the auction block. The first-half tally of 64 was double the 32 for the whole of last year - and also a big jump from 24 in 2012 and 39 in 2011.

    In H1 this year, the number of properties put up for auction by owners was 192, down from 226 in the same year-ago period.

    As a result, while the owner sales' share of properties put up for auction has dropped from 93.4 per cent last year to 75 per cent in H1 this year, the mortgagee sales' share has risen from 6.6 per cent to 25 per cent.

    On a quarterly basis, the mortagee-sale share has doubled from 16.7 per cent in Q1 this year to 33.9 per cent in Q2 - the highest level since the 35.5 per cent share in Q1 2008 during the global crisis.

    Colliers' analysis took into account information as at June 19 from auction lists of the major houses forthis month.

    While DTZ conducted its auction on Thursday, Colliers, Knight Frank and JLL will conduct theirs this week.

    JLL's analysis shows that for January to May this year, 13 properties (both owner and mortgagee sales) were sold for a total of about $26 million at auction. Of this, the mortgagee sales accounted for nine properties, which fetched about $13 million.

    For the whole of last year, 21 properties amounting to about $100 million were sold at auction, of which 10 properties totalling about $13 million involved mortgagee sales.

    Typically, financial institutions give some leeway to borrowers who are experiencing difficulty servicing their mortgages by giving them the first crack at finding a buyer as owner sales tend to fetch a higher price compared with a mortgagee sale, which is often seen as distressed. However, the implementation of TDSR has made it difficult for potential buyers to obtain credit.

    "More buyers have also chosen to stay on the sidelines with a view that prices will start to ease," said JLL's head of auction and sales, Mok Sze Sze.

    She said that due to exuberance at private housing launches in the past few years, many buyers bought uncompleted properties "off plan", with the non-savvy ending up with units that have undesirable orientation or layout. Such owners now face difficulty finding buyers and tenants.