Property auction market remains tepid

The property auction market in Singapore went into a deeper slumber in the fourth quarter, with only S$3.9 million in sales closed, a 15.1 per cent decline from the preceding quarter’s already tepid S$4.6 million, as loan curbs and cooling measures continued to weigh on the market, real estate firm Jones Lang Lasalle (JLL) said yesterday.

Ms Mok Sze Sze, JLL’s Head of Auction and Sales, said: “The credit tightening measures of the Total Debt Servicing Ratio (TDSR) and the Additional Buyer’s Stamp Duty (ABSD) deterred investors and were considered to be the major attributes of the rather quiet auction market in the second half of 2013.”

“Buyers have been very cautious at this point in time, when the property market is believed to have reached an inflection point. On the other hand, most of the sellers do not seem willing to lower their price expectations. Both sides are still waiting for market clarity,” she added.

Under the TDSR, effective from June 29 last year, financial institutions must ensure that housing loans they grant do not push a borrower’s total debt payment obligations above 60 per cent of his or her monthly income.

A rate of 3.5 per cent, or the prevailing interest rate, whichever is higher, is also used to calculate loan repayments. The framework came after the ABSD was imposed in January as well as a seller’s stamp duty on industrial properties.

The fourth-quarter sales value was 88.1 per cent lower than the five-year average quarterly sales of S$32.7 million, and 91.5 per cent lower than the 10-year average quarterly sales of S$46 million, JLL said. The number of properties sold during auction increased from three in the third quarter to four in the fourth.

For the full year, the number of properties sold by auction fell by 19.2 per cent to 21 last year from 26 in 2012, but the corresponding total sales value climbed 69.5 per cent to S$99.6 million.

While this was due to a higher number of large deals closed during the year, the total sales quantum in 2013 was still 23.9 per cent below the five-year average of S$130.8 million, and 45.9 per cent less than the 10-year average auction sales of S$183.9 million.

The largest auction deal last year was a factory at 39 Benoi Road worth S$25.6 million, which was sold in February by JLL. It said it accounted for the highest auction sales last year, in terms of property value, among all the auction houses.

JLL said it believed that an auction is the preferred sales avenue of many residential property owners, but it noted that in the recent two quarters, properties sold during auction were all from the industrial sector.

Looking ahead, Ms Mok said: “The majority of players believe that market fundamentals remain strong. Mild and gradual recovery is expected in the coming quarter. Increase in sales volume compared to 2013 is predicted as buyers and sellers seek ways to absorb the additional costs incurred due to the cooling measures. In the near term, the auction market is likely to gain back the sales momentum and recover at a faster pace as investment sentiment improves. Generally speaking, we expect higher success rate and better market performance in 2014.”

Source : Today – 3 Jan 2014

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