More homes in Singapore could be up for auction this year, as the number of bankruptcy petitions increases, according to Knight Frank, a real estate consultancy.
It said in its latest report on the auctions market on January 30 that it came amid the higher cost of living, rising interest rates and the reduction of pandemic support measures.
The Ministry of Law data shows that 3,648 people filed for bankruptcy last year, which is 15 per cent higher than the 3,160 applications filed in 2021.
This number, which includes repeat listings, could surge by 40 to 50 percent to about 600 this year, Knight Frank said in its report.
The listings include 184 private residential properties put up for auction by owners or banks, as well as 211 commercial units, including retail shops, offices and industrial space. There were 11 shophouses, 12 Housing Board flats and two buildings classified as others besides more homes being put up for auction, the number of commercial and industrial properties going on the block could also increase. The Knight Frank report said that more small and medium-sized enterprises SMEs are exiting their business due to a gloomy economic outlook.
Another real estate consultancy, Edmund Tie, believes auction listings will increase but only towards the second half of the year, as banks will take several months to rescind the units.
As interest rates continue to rise, those tied to home loans with floating rates will feel the pinch, said Ms Joy Tan, head of auction and sales at Edmund Tie.
The three-month compounded Singapore Overnight Rate Average, SORA, a key benchmark used to price home loans, went up from below 0.2 per cent in January 2022 to more than 3 per cent this year.
Those who bought their properties during the 2021 property boom year on two-year fixed rates will be looking forward to refinancing this year, and will also feel the pinch with the new rates, said Ms Tan.
She said there are sellers with strong holding power.
There is no urgency for the sellers to dispose of their investment residential properties because of the healthy rental market. As of now, the auction market has not seen the full impact of rising interest rates. Banks told the CNA that foreclosures have not increased, but more customers are looking to refinance their home loans for better interest rates.
One bank, UOB, said it had not seen a significant increase in customers needing help with their loans. Ms Jacquelyn Tan, head of group personal financial services said that it hasn't seen any systemic stress in its mortgage portfolio.
Maybank said there has not been a noticeable increase in customers seeking help with their mortgage payments. A spokesman said more people are enquiring about cheaper loan packages because of the hike in interest rates.
According to Knight Frank, 133 of the 420 auction listings were mortgagee listings last year. Mortgagee sales occur when the owner is unable to pay the loan and the bank forecloses on the property.