SINGAPORE, 6 May 2020 – Accounting for 356 mortgagee-sale listings out of a total of 1,320 auction listings, residential properties under auction in 2019 appeared to have borne the brunt of macroeconomic headwinds generated by the protracted US-China trade war, Brexit and other geopolitical uncertainties.
This represented a 61.1% year-on-year (y-o-y) increase, up from 221 residential mortgagee listings in preceding year, and in terms of absolute numbers, made the residential market one of the most volatile vis-à-vis other sectors.
Ms Alice Tan, EDMUND TIE’s senior director of research and consulting, said: “By and large, highly leveraged homeowners are grappling with higher risks, with the result that shocks and disruptions to income may lead to inability to continue servicing mortgage loans.”
“The outbreak of COVID-19 since late December last year added pressure to an already difficult environment that was barely recovering, and, barring further government intervention, is anticipated to further trigger mortgagee sales” she added.
In Q1 2020, the proportion of mortgagee sales relative to the total number of auction listings saw a substantial y-o-y increase to 68 per cent, up from 46 per cent in the same quarter last year.
While listings have increased, the auction success rate had not kept pace and in fact declined, alluding to a more cautious sentiment in the buyers’ market. From 3.8 per cent in 2018, the success rate fell to 1.6 per cent in 2019, with only 21 properties knocked down during auctions.
To extend a helping hand to beleaguered homeowners, the Monetary Authority of Singapore (MAS) on 31 March announced a deferment on principal payment or both principal and interest payments for cash-strapped homeowners with residential property loans up to 31 December 2020. Many financial institutions have also extended payment deferments to individuals with commercial or industrial property loans.
MAS further added that those borrowers were not subjected to the Total Debt Servicing Ratio (TDSR). Additionally, the COVID-19 (Temporary Measures) Act 2020, which came into force on 8 April 2020, was enacted to ensure that landlords pass on property tax rebates in full to their tenants. With such government measures in place, pressure on individuals and businesses may ease in the interim.
For the remainder of the year, and even heading into early 2021, EDMUND TIE’s head of auction and sales, Ms Joy Tan, projects that the mortgagee sale outlook will follow a tick-shaped recovery, also popularly known as the “Nike swoosh”.
Joy Tan said: “The drop is expected to be rather gentle, given the three packages implemented by the Government. As a result, homeowners would not be anxious to liquidate their assets at a lower price as the packages will tide most of them over this crisis.”
“This ‘Nike Swoosh’ scenario also allows for limits set by the Government to be slowly eased more carefully. Furthermore, prospective clients will remain cautious with taking long-term loans and would choose to adopt a wait-and-see approach. Hence, the upturn in mortgage sales will follow a slightly gentler curve stretching into early 2021 before reaching pre-coronavirus levels,” she added.
For further information, please contact:
Wong Wei Chen
Senior Manager, Corporate Communications
O: +65 6393 2369
About EDMUND TIE
EDMUND TIE is a full-service, real estate consulting firm with more than 400 skilled professionals in the region. It is headquartered in Singapore and supported by offices in Kuala Lumpur, Malaysia, and Bangkok, Thailand. We offer a comprehensive suite of agency and professional services including investment advisory, business space and retail, residential agency, auction and sales, valuation advisory, statutory valuation and property tax advisory, research and consulting, property management, and hospitality management. For more information, please visit www.etcsea.com.
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