No residential property sold at auction during Hungry Ghost Month

Sellers’ increased expectations and higher asking prices prompted one of lowest auction sale in 13 years.

Only three properties worth a total of S$5.23 million were sold by all Auction Houses in Singapore during the Hungry Ghost Month period, which falls from 10 August to 7 September this year, according to a Colliers International report.

The three properties included two shophouses at Dunlop Street (Little India) which were sold for a total of S$4.04 million, a HDB shop at Bishan for S$910,000 and a strata factory at Toh Guan Centre (Jurong) for S$280,000.

Ms Grace Ng, Deputy Managing Director (Agency and Business Services) of Colliers International, says, “The sale value achieved this year pales in comparison to last year’s 14 transactions worth S$25.92 million, of which S$18.98 million was contributed by the residential sector.

"On the contrary, no residential properties were sold at auctions during the Ghost Month, despite 44 of such properties being put up for sale. This could be attributed to sellers’ increased expectations and higher asking prices, leading to a longer period of marketing and negotiations as buyers’ resistance set in over time.”

The total number of properties being put up for auction sale during the Ghost Month period remained high at 51 – of which 44 properties (86 per cent) were put up by property owners. The remaining seven properties (14 per cent) were mortgagee sale, which is the lowest figure in 13 years, as well as the lowest monthly figure by far in 2010.

While the continued decline in the number of mortgagee sale could be attributed to the buoyant economy, high employment figures, low interest rates and a robust property market, the increasing proportion of properties put up by owners supported the fact that owners in Singapore are increasingly unaffected by cultural taboos.

Instead, they are now savvier and would time their sale according to market condition. Additionally, cultural taboos attached to the Ghost Month have little or no impact to buyers nowadays, as it usually takes three months to complete the entire sale process, and to take possession of the property.

Outlook of auction property market
By far, the total sale value achieved at auctions for 2010 has reached some S$114.65 million. It is expected that the total sale value for the entire year would remain close to what was achieved last year at S$168.4 million.

Ms Ng concludes, “The latest cooling measures implemented by the Government are likely to have an impact on the property auction market in the short term. Buyers will now be more careful in doing their sums based on the reduced 70 per cent loan-to-value in financing, while sellers will be more realistic in setting their asking price.

Nonetheless, we expect certain segments of the residential market to remain popular at auctions. Well-located landed properties in Districts 9, 10 and 11, as well as those properties that are located near the upcoming MRT stations of the new Downtown and Circle Lines, will continue to attract upgraders.

The new guidelines will have minimal impact on those buyers sourcing for properties in these locations, as they are mostly owner-occupiers buying for mid- to long-term stay. Hence, they are not affected by the new measure, in which a stamp duty is imposed on property held for less than three years.

Furthermore, this group of buyers has the tendency to take a lower percentage of financing, as most of them would finance their purchase using the cash obtained from the sale of their first property.

Commercial properties, including shops and shophouses, will continue to attract investors, who seek higher returns than the paltry interest of less-than-one-per-cent offered by banks for fixed deposits, since this class of property typically generates returns of some four to six per cent.”