Shops and shophouses overtake residential units in auctions
Shops and shophouses overtook residential properties in
total sales value in auctions in the first quarter of this year, a report by
Knight Frank released on Wednesday shows.
Remisier kings
The cousins who have taken over Peter Lim’s throne View PDF
Comments
Lynette Khoo
21 April 2016
Shops and shophouses overtook residential properties in total sales value in auctions in the first quarter of this year, a report by Knight Frank released on Wednesday shows.
Some S$5.5 million worth of shops and shophouses were sold in auctions in Q1, more than double the residential sector's S$2.5 million.
This marked the first time since the second quarter of 2014 that the residential sector was not the top pick in the auction market though it still dominates the number of listings.
Knight Frank observed that the shift in buyers' preference from residential properties to shops and shophouses or industrial properties could be due to the tendency to avoid the additional buyers' stamp duty, which only applies to the residential sector.
On Wednesday, however, there were no takers for the three HDB shophouses - located in Everton Park, Silat Avenue and Lorong 1 Toa Payoh - put up by owners for sale at an auction held by Colliers International, despite the palatable opening price of S$1.75 million for Everton Park and S$2 million for the other two HDB shophouses.
All of these are tenanted to food and beverage outlets and offer a yield of around 4 per cent, according to Colliers. They will be scheduled for the next auction on May 26 if private negotiations fail.
Colliers Singapore managing director for auction and sales Grace Ng noted that prices for HDB shophouses have been quite stable in the past two years, with no significant spike or drop.
"Vendors are generally reluctant to drop their asking prices as they are still able to get good and stable yield for these properties," she said. "They are able to rent out the shop with living quarters together to one tenant or they may subdivide the shop on the first storey to two units which makes the rental very affordable and rent out the living quarters separately. Generally a total rental of at least S$5,000 for these properties is easily achievable."
Shops and shophouses also bucked the downtrend in the number of properties put up for auction, with a 145.5 per cent increase in listings to 27 units in the first quarter from the preceding quarter. More shops and shophouses could be up for auction given the continued weak retail sentiment, Knight Frank said.
In contrast, the total number of properties put up for auction dipped 19.4 per cent from a quarter ago or 24.6 per cent from a year ago to 141 units in Q1 2016. This was the first time since Q4 2014 that the number of properties put up for auction fell under the 150-unit mark.
But the success rate is recovering. The number of properties successfully sold under the hammer doubled from four in fourth quarter of 2015 to eight in the first quarter of 2016. This translated to an overall success rate of 5.7 per cent, a recovery from the record low of 2.3 per cent seen in the last quarter of 2015 but a decline from the high success rate of 8 per cent witnessed a year ago, based on Knight Frank's compilation.
The success rate for auctioned shops and shophouses has gone up to 14.8 per cent from an absence of transactions for the asset class in Q4 2015, while that for residential sector was 2.4 per cent - the lowest since Q4 2013.
"With auction having gained acceptance and popularity as a viable way to market properties, the total number of properties put up for auction in the first half of 2016 can be expected to cross the 300-unit mark," Knight Frank said.
Despite the improvement in success rate from a quarter ago, the first quarter's auction sales of S$9.6 million still represented a 11.2 per cent quarter-on-quarter decrease and a 73.2 per cent year-on-year slump. This is attributed to the price gap between buyers and sellers, especially for larger and higher-priced units.
There was also a higher proportion of lower priced properties streaming into the auctions. Properties below S$2.5 million and those within S$2.5 million to S$5 million made up 60 per cent and 31.9 per cent respectively in the first quarter, up from 54.9 per cent and 28.6 per cent in the last quarter of 2015. Of these, the number of properties below the S$1 million-mark also increased from 36 units in Q4 2015 to 37 units in Q1 2016. This represented 26.2 per cent of the auction market, the highest since Q2 2013.