Total value of auction properties rises in 1H2016

THE Malaysian property auction market saw 12,336 properties worth about RM4.38 billion going under the hammer in 1H2016. This works out to an average of 2,056 properties a month, according to data compiled by AuctionGuru.Com.My.

In terms of volume, the number in 1H2016 has dropped by 1,625 cases, or 11.6%, from the same period last year. However, value-wise, it has increased by 34.8% to RM4.38 billion from RM3.25 billion in 1H2015.

For the first half under review, March saw the highest number, totalling 2,276 properties worth RM814 million, being put up for auction. January recorded the lowest number of auction cases with 1,746 properties valued at RM545 million.

Executive director of online auctions listing platform AuctionGuru.Com.My Gary Chia says the continuous dipping of auction cases shows that owners have stronger holding power, which reflects the effectiveness of Bank Negara Malaysia’s cooling measures such as the tightening of borrowing guidelines and the ban on the Developer Interest Bearing Scheme (DIBS).

Among the 12,336 properties which went under the hammer, 89% or 10,947 cases were residential properties, 8% or 986 cases were commercial while land cases amounted to 3% or 403 cases.

“The number of auction cases for the first half of this year had continued to dip but the value of the properties had shot up significantly as more high-value commercial properties were put up for auction,” he tells TheEdgeProperty.com.

In total, 986 commercial properties, including retail units, industrial and office properties, went under the hammer in 1H2016, compared to 1,083 cases in 1H2015. Nevertheless, the value of the commercial properties had increased 64% to RM898 million in 1H2016, from RM547 million in 1H2015.

“Dampened consumer sentiment and slowdown in business activities have impacted the demand for commercial properties, especially industrial properties and offices. Retail shoplots are also being affected due to weaker rental demand,” he explains.

More new properties being put up for auction

According to Chia’s observation, quite a number of newly handed over properties last year were put up for auction in 1H2016. These included units from Empire City Damansara, Mirage by the Lake and some retail as well as SoHo units in Sunway Nexis.

“For instance, a 3-storey shop office in Sunway Nexis went under the hammer in 2Q2016 but failed to find its new owner. It had then seen its reserve price in the subsequent auction (September) drop about 27.1% to RM4.59 million from RM6.3 million previously,” he added.

Apart from commercial properties, the value of land plots that went under the hammer in 1H2016 also saw the accumulative value increase 54.8% to RM652 million from RM421 million in 1H2015.

For residential properties put up for auction in 1H2016, the value had increased 18.9% to RM2.83 billion from RM2.38 billion in 1H2015.

Increased interest in private auctions

According to Chia, over 90% of the cases in the auction market were foreclosure properties which were put up for auction by banks when owners failed to service their mortgage loans. Less than 10% of the cases were from private auctions.

However, he notes that the unfavourable property market has resulted in more owners enquiring about private auctions in their search for various avenues to dispose of their properties.

“I have received enquiries from owners who want to put up their properties in private auctions with the intention of looking for higher transaction prices,” he reveals.

However, he says private auction events have yet to become popular locally and most owners will have second thoughts after discovering that certain fees and expenses need to be paid before the property is sold, with no guarantee of the outcome.

The slowdown in the local economy has been eroding the holding power of existing high-value properties, especially for the retail, industrial and office sections, which are facing difficulties in securing tenants.

“This may further dampen investor appetite towards buying high-end properties which have lower rental yield or commercial properties which have weaker demand now,” he adds.

However, Chia points out that even when times are bad, there are still buyers out there with cash or surplus income looking for properties to buy or invest in.

Chia says most buyers in the auction market are looking for properties with reserve prices that are more than 30% below the market price and are located in mature or popular areas.

“Most of the interested bidders are taking a wait-and-see approach for better bargains. We believe if there is a good property which provides buyers with a visible upside potential, there will be a demand for it,” he highlights.

Chia foresees an increase in the number of auctions in the second half compared to the first half.

This story first appeared in TheEdgeProperty.com pullout on Oct 14, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com pullout here for free.