Mortgagee listings for residential and industrial properties build up in Q2 as bankruptcies rise

MORE residential and industrial properties in Singapore were put up for mortgagee sales in the second quarter of 2024, as homeowners and businesses in Singapore continued to bear the brunt of high interest rates and a tough business climate.

Property consultancy Knight Frank expects more distress sales to surface in the remaining six months of the year.

Data from the Ministry of Law showed that a total of 1,209 applicants filed for bankruptcy in Q2 2024, up 7.5 per cent from Q1, and up 32.6 per cent from the year before, noted Knight Frank in a report released on Monday (Jul 29).

The number of business cessations rose 9 per cent to 15,482 entities in Q2, from the 14,202 business closures in Q1; the figure was a 20.6 per cent jump from the second quarter of last year.

Knight Frank and Edmund Tie, which hold monthly property auctions, both tallied more mortgagee listings in the April-June period. The number included some of the properties seized by police in the multi-billion-dollar money laundering probe, which were released for sale during the quarter to recover funds owed to banks.

In auctions handled by Knight Frank during the quarter, the number of residential mortgagee listings doubled from 12 in Q1 to 24 in Q2; of the number, 20 were non-landed homes, and four were landed ones.

Industrial property mortgagee listings more than doubled during the quarter, from five in Q1 to 12 in the second quarter.

The jump in listings was due to “distressed residential assets surfacing on the auction platform after having endured a higher-and-for-longer interest rate environment for almost two years, with some homeowners finding it increasingly challenging to service a monthly mortgage against a backdrop of weakening rents”, Knight Frank said.

The increase in distressed industrial listings, on the other hand, was rooted in part in business owners’ failure to sustain operations in a tough climate. The manufacturing sector contracted 4.3 per cent in 2023, said Knight Frank.

Over at Edmund Tie, total mortgagee listings rose to 45 in its Q2 auctions, up 50 per cent from 30 listings in the previous quarter. The firm said mortgagee listings have climbed steadily from a low of 21 listings in Q2 2023. There were 75 mortgagee listings in the first half of 2024, up from 49 in the corresponding period the year before.

Knight Frank noted the fallout from the higher Additional Buyer’s Stamp Duty, which took effect in April 2023; homeowners have found it tough to sell properties in prime areas in the past year.

More owners are turning to the auction platform to market their properties. The number of owner sales’ listings for residential homes jumped 51.6 per cent to 47 in Q2, from the 31 listings in the previous quarter.

Joy Tan, head of auction and sales at Edmund Tie, noted that in the year to date, there have been more owner sales listings than mortgagee listings. She said this pointed to owners being more receptive to using auctions to fetch the highest price through a transparent process. Auctions minimise the hassle of seller-buyer negotiations, which could be long drawn out.

But while both agencies noted more properties listed for auction, they sold fewer properties.

Knight Frank listed 115 properties (including repeat listings and excluding properties sold outside of auction) during the quarter – up 27.8 per cent quarter on quarter.

Residential properties made up 63.5 per cent (or 73) of the total listings, and industrial properties made up 23.5 per cent of the listing or 27 units. The remaining units listed in Q2 consisted of 12 retail units, an office unit and a shophouse that was a repeat listing.

Knight Frank sold three properties for a total of S$7.2 million during the quarter – one industrial and two residential – translating to a success rate of 2.6 per cent.

This was lower than the five properties (out of a total of 90 listings) sold in the previous quarter, which worked out to a 5.6 per cent success rate.

At Edmund Tie’s auctions in H1, the bulk of the 225 listings (42 per cent) were non-landed residential properties; industrial properties accounted for 23 per cent, and retail units, 16 per cent, said Tan.

In its auctions in H1, eight properties were sold, or about 3.6 per cent of listings.

More owners are putting up their properties for sale via auction, especially those who made the purchase during the pandemic.

“This is on the back of their properties coming due for refinancing, which would now be faced with higher interest rates, plus the expected residential supply coming on stream this year,” said Edmund Tie’s Tan.

For the rest of the year, Knight Frank also expects to see more properties being force-sold by condominium management bodies seeking to recover fee arrears. Such sales, called Management Corporation Strata Title (MCST) sales, can take place after the owner defaults on monthly maintenance fees and sinking fund contributions.

The real estate consultancy said: “It has been observed that more owners of all types of properties amassed chronic maintenance fees in arrears over a substantial number of years for many reasons. For example, some of these owners died intestate, or left the country, and all efforts to contact them failed.”

Knight Frank auctioned a Dover Parkview unit in an MCST sale for S$1.82 million in Q2, 7.1 per cent higher than the opening price of S$1.7 million.

Industrial listings, meanwhile, could start to ease off, Knight Frank said, “with the manufacturing sector showing nascent signs of improvement in the first half of 2024, and interest rates expected to be cut in the second half of the year”.