Singapore’s property auctions market has bounced back from lower sales activities to become an efficient platform for homeowners to make a quick sale on their properties, according to JLL research analyst Shuyu Sun.
She noted that in the last two years, auctions were affected by softer investor sentiment and transaction volume in the property market due to the government’s cooling measures.
But from the second half of 2014, auction sales picked up with a significant increase in the total value of successfully auctioned properties.
Part of the reason for the higher activity is the growth in mortgagee sales. Since the introduction of the Total Debt Servicing Ratio (TDSR) framework in June 2013, the number of mortgagee listings has risen from only 28 in 2013 to 150 last year.
Another contributing factor is the narrowing price expectation gap due to compromises between sellers and buyers which has led to quicker sales at auctions.
“From the buyers’ perspective, the anticipation of a potential relaxation of cooling measures alongside the expected rise in interest rates in the immediate horizon could have encouraged these purchases,” said Sun.
At the same time, sellers are also more willing to lower price expectations as a result of weaker market conditions.
“Observations at recent auctions revealed that sellers have become more flexible in terms of pricing, dangling sweeteners, including discounts on opening prices, to entice potential bidders and, in some instances, accepting offers below the reserve price,” Sun shared.
Moving forward, the greater parity between buyers and sellers on price expectations is expected to increase activity in the auctions market this year.
Having said that however, there are downsides for potential investors. For instance, the softer leasing market means more properties are being sold with vacant possession. According to JLL, 26 of the 32 properties sold at auction in 2014 were on a vacant possession basis.