Colliers International
Compared to 2018, Colliers noticed a larger number of properties were being put up for multiple rounds of auction in 2019, resulting in higher levels of listings across all sectors and all major auction houses. The robust auction listings, especially in mortgagee properties, reflect the challenging economic outlook and uncertainties in 2019. Faced with a subdued rental market and the dampening effects of the July 2018 cooling measures, the residential sector continued to lead both auction listings and sales in 2019. In total, 11 non-landed residential units, nine strata-titled industrial and retail units, and one shophouse were sold during auctions in 2019 making a total of 21 properties, a decline of 40.0% YOY from 35 properties knocked down during auctions in 2018.
With rising listings, the success rate fell further to 1.4% in 2019, lower than the 3.2% achieved in 2018 and the lowest annual level in our database. However, this rate does not take into account properties sold before or after the auctions. The results from Colliers International’s auctions indicated that the success rate including sales during and outside of Colliers’ auctions and excludes re-listings, was much higher at 13.3% in 2019. Of the 21 properties knocked down during auctions in 2019, 16 (or 76.2%) were mortgagee sales, a decline of 33.3% YOY from 24 in 2018. Of these 16 mortgagee sales in 2019, eight were residential (down 50.0% YOY), four were industrial (down 33.3% YOY) and four were retail (up four times YOY).
With rising listings, the success rate fell further to 1.4% in 2019, lower than the 3.2% achieved in 2018 and the lowest annual level in our database. However, this rate does not take into account properties sold before or after the auctions. The results from Colliers International’s auctions indicated that the success rate including sales during and outside of Colliers’ auctions and excludes re-listings, was much higher at 13.3% in 2019. Of the 21 properties knocked down during auctions in 2019, 16 (or 76.2%) were mortgagee sales, a decline of 33.3% YOY from 24 in 2018. Of these 16 mortgagee sales in 2019, eight were residential (down 50.0% YOY), four were industrial (down 33.3% YOY) and four were retail (up four times YOY).
The number of both owner listings and mortgagee listings saw strong increases in 2019, with mortgagee listings rising to a record level. Total owner listings were up by 14.8% YOY to 707 as owners continued to sell their properties via auctions for maximum exposure and a higher chance to achieve optimal prices. Due to a more challenging economic environment, total mortgagee listings surged by 59.1% YOY to 751 in 2019, driven mainly by the residential sector which was up by 67.4% YOY to 432. Colliers believe the higher mortgage payments due to rising interest rates during 2015-2019, coupled with a subdued residential rental market, contributed to the increase in residential mortgagee listings.
Personal circumstances such as loss of job or bankruptcy could also have led to higher defaults. After cooling measures in July 2018, possibly more distressed owners were unable to dispose of properties quickly enough, leading to default. Retail mortgagee listings saw a 72.7% increase YOY to 114 as many were small units in strata-titled malls or locations with low foot traffic which had difficulty finding tenants or sustainable rents, leaving owners unable to support mortgage payments. Industrial mortgagee listings rose by 29.5% YOY to 189 while office mortgagee listings surged by eight times YOY to 16.
Personal circumstances such as loss of job or bankruptcy could also have led to higher defaults. After cooling measures in July 2018, possibly more distressed owners were unable to dispose of properties quickly enough, leading to default. Retail mortgagee listings saw a 72.7% increase YOY to 114 as many were small units in strata-titled malls or locations with low foot traffic which had difficulty finding tenants or sustainable rents, leaving owners unable to support mortgage payments. Industrial mortgagee listings rose by 29.5% YOY to 189 while office mortgagee listings surged by eight times YOY to 16.
Despite the lower number of sales in 2019, total aggregate value of properties sold at auctions remained relatively stable at SGD50.1 (USD37.2) million, a marginal decline of 1.7% YOY, due to the higher quantum per unit transacted in 2019. Despite the fewer number of properties knocked down, the total mortgagee sales value actually increased 25.3% YOY to SGD38.5 (USD28.6) million as the average ticket size in 2019 almost doubled that of 2018. The mortgagee sales value accounted for 76.8% of total auction sales value, up from 60.3% in 2018. The residential sector accounted for the lion’s share at 79.2% of total mortgagee sales value, up from 73.4% in 2018.
Colliers expected an increase in distressed or mortgagee sales in the retail, industrial and residential sectors from the ongoing COVID-19 outbreak especially if it precipitates a downturn into H2 2020 with prices to be more realistic, leading to an improved success rate.
Colliers expected an increase in distressed or mortgagee sales in the retail, industrial and residential sectors from the ongoing COVID-19 outbreak especially if it precipitates a downturn into H2 2020 with prices to be more realistic, leading to an improved success rate.
Credit: Colliers International Report dated 10 March 2020
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