Sometime between January and October of this year, Colliers International noted that there were 98 repossessed residential units set up for auction. Compared to that in 2013, there were only 17 units.
According to the media reports, there have been an increased in the number of houses placed on the auction block by banks; numbers skyrocketing to almost five-fold. This was mainly due to borrowers being unable to sell their luxury units amid the weak property prices. The government’s tough cooling measures and slow demand have posed a great hurdle to them.
Among the bunch included non-landed properties at renowned residential projects such as Turquoise at Sentosa Cove, Reflections on Keppel Bay and Stevens Court at Stevens Road. Deputy Managing Director of Colliers International, Grace Ng, explained that the restrictive red tape and financial outlook have made it challenging for borrowers to sell on their own.
In addition, many buyers choose to remain reserved and cautious in their spending too. To add to the burden, non-performing loans (NPL) of local banks have substantially increased as they have faced numerous defaults by high-end property owners.
Singapore’s Managing Director of Chesterton’s, Donald Han analysed that once the loan quantum is pushed to the limit, and values have dropped, one will face difficulty refinancing.
Should the party’s credit worthiness remain unattractive, it would only aggravate the challenge. Furthermore, banks are likely to react by insuring for more money to top up your value. When the party concerned is not able to do so, they may go into the NPLs.
The NPLs nearly doubled in number to $502 million in the third financial quarter as compared to only $295 million a year ago. United Overseas Bank (UOB) deduced that the significant increase is mainly attributed to borrowers who invested in a specific luxury project in Singapore. Besides this, the lender has also declined to reveal its name.
In the same period, Overseas Chinese Banking Corporation’s (OCBC) NPLs rose to $272 million from $227 million. A factor to its increase was attributed to the consolidation of OCBC Wing Hang’s portfolio.
(Adapted from Property Guru Nov 17, 2014)