Property auction listings surge as mortgage defaults hit owners in 2019

The number of listings under mortgagee sales sharply rose 61.13% to 630 in 2019.

As bankruptcies and defaults plague the subdued economy, more homeowners in Singapore have resorted to auctioning their properties just to pay off their bad debts, including their mortgages. This was seen in the rise of listings under mortgagee sales, which grew 61.13% YoY from 391 in 2018 to 630 in 2019, according to data from Knight Frank.

The rise of mortgagee sales boosted the yearly total for auction listings, which include repeat listings, by 23.9% YoY to 1,387 listings in 2019. The success rate for these listings, however, dropped to 1.4% from 3.1% in 2018, and properties underwent more rounds of auction.

Whilst the number of mortgagee sales has been steadily increasing since 2014, Knight Frank said that the reasons for the surge in listings for 2018-2019 were different. Sharon Lee, head for residential (auction & sales) at Knight Frank, said, “From 2014 to 2017, the surge in mortgage sale listings was due to higher retrenchments, hikes in interest rates, and drop in rental payments. However, from 2018 to 2019, the rise in listings seemed to correlate with more applications for bankruptcies and increased volatility within the equity markets.”

“Slowing economic growth and the trade war between China and the United States also led to an accumulation of bad debts and a fall in top-line growths, pressurising some owners to default on mortgage payments,” Lee added.

A majority of the properties that were auctioned are homes. Under mortgagee sales, residential listings jumped for the third year by 62.6% YoY to 356. Condo listings nearly doubled to 257 listings, from 139 listings in 2018, with listings from District 9 eclipsing other districts.

Landed residential property listings grew steadily from 18 listings in 2014 to 99 listings in 2019, with a rise in listings recorded in the prime district. This suggests that a larger spectrum of owner-occupiers were affected by the slowdown in growth in sectors like construction and manufacturing, the report said.

Listings for penthouses not limited to prime districts almost tripled to 68 listings in 2019, from 23 in 2016. The average rounds of auctioning rose to 2.6, from 2.2 in 2018.

Industrial properties were not spared from going under the hammer. Listings surged 34.2% YoY to 153 in 2019, as industrialists faced higher financial pressure from an uncertain external environment and contraction of the manufacturing sector, which affected the financial cashflows of end-users.

Retail property listings also more than doubled to 103 due to slower retail sales. The average round of auctioning also grew to 3.4, from 2.7 in 2018.

Listings under owner sales climbed to 687, compared to 650 in 2018. In Q4, the number of listings declined for the second quarter by 15.4% QoQ to 121, decreasing by 15.4%. On a YoY basis, it plummeted 50%.

The number of owner sales in the industrial sector declined from 114 in H2 2018 to 43 H2 2019, whilst listings for retail properties fell from 60 to 40 over the same period. Some of the retail and industrial listings also became mortgagee sales.

In contrast, residential listings went up to 338 in 2019, from 209 in 2018, as the price gap between buyers and sellers widened. The properties also went through more rounds of auctions as buyers took a wait-and-see approach.

Landed residential property listings under owner sale grew from 137 in 2018 to 142 in 2019, whilst the number of condo listings more than doubled to 196 in 2019, from 72 in 2018.