Going, going, gone. Slipping property prices, a stricter regulatory environment and poor financial planning are forcing delinquent owners to turn off the lights in their homes permanently, piling on banks’ non-performing loans and leaving a trail of repossessed properties under the auctioneer’s gavel.
The number of residential properties being put up for auction by banks, or mortgagee sales, have soared this year as more high-end homeowners unable to meet their monthly payments find themselves unable to dispose of their properties in a lacklustre market.
In the first 10 months of this year, 98 residential properties were put up for auction sale by banks, Colliers International Singapore Research told TODAY. This is about five times the 17 homes they put up for auction in the whole of last year.
Notably, non-landed homes in several prominent residential enclaves featured strongly in mortgagee listings this year, said Colliers. These include units at Reflections at Keppel Bay, Turquoise at Sentosa Cove and Stevens Court on Stevens Road.
The jump in forced house sales comes amid a spike in local banks’ non-performing loans (NPL), due primarily to defaults by mostly high-end property owners.
United Overseas Bank said last month its housing NPLs rose to S$502 million in its fiscal third quarter, up from S$295 million in the year-ago period, mainly because of “borrowers investing in a particular high-end residential project in Singapore”. It did not name the development concerned.
Likewise, at the Oversea-Chinese Banking Corporation Limited, housing NPLs climbed to S$272 million in the third quarter from S$227 million a year ago, although the consolidation of OCBC Wing Hang’s portfolio also contributed to the rise.
Analysts say while the market has indeed become unfavourable for high-end homeowners following the introduction of stricter regulations that has since led to sliding property prices, some of the problems faced by these owners were borne from their poor financial planning, which left them in a bind after the Total Debt Servicing Ratio kicked in last June.
“If you have maxed out your loan quantum and values have dropped, you will have difficulty refinancing, especially if your credit worthiness is not attractive. There’s a possibility that banks may ask you to pump in more money to top up your value. When someone is not able to do so, that may go into the NPLs,” said Mr Donald Han, managing director of Chestertons Singapore.
Ms Grace Ng, deputy managing director of Colliers International, added: “Amid the stricter regulatory and financing environment, borrowers in default are finding it difficult to sell their properties on their own, as buyers generally remain cautious.”