Investor appetite for properties predicted to wane in 2H

There's a disparity between sellers and buyers.

According to Knight Frank, in view of the recent property measures, investor appetite for property is expected to wane.

Generally, property owners are less willing to lower their asking prices due in part to higher transaction costs arising from the Seller’s Stamp Duty.

Prospective buyers are more discerning in light of the Additional Buyer’s Stamp Duty (ABSD), lower loan-to-value ratios and the recent TDSR ruling.

These circumstances have led to a disparity in price expectation between the buyers and sellers, especially in the residential sector.

The ABSD also curbed the number of residential properties put up for auctions as owners would have to incur ABSD for a replacement property should they sell their existing property, thus diverting both sellers and buyers’ interests to other real estate asset classes such as industrial properties and shops.

While the success rates for auctioned properties have been decreasing, the high total sale value of $91.1 million achieved in 1H 2013 reflects buyers’ general willingness to pay should the properties cater to their needs.

However in view of the TDSR introduced in end June 2013 where more stringent property loan assessments and considerations are conducted by financial institutions, investor appetite for property is expected to wane.

Impact of cooling measures and TDSR are felt as July auctions market was affected with no properties sold in the first month after implementation of measure.

Amidst measured purchasing appetite, none of the 40 properties put up for auction in July 2013 was sold.

Despite that the overall property market is likely to slow down for 2H 2013, sale enquiries and auction activities could potentially increase for 2H 2013 as sellers become more motivated to sell given the exposure that auction can offer.