KUALA LUMPUR
(March 20): The number of properties that went under the hammer fell for the
third consecutive year in 2016, despite the prolonged slowdown, thanks to the
earlier property boom that had lifted prices.

Tom Low Chee
Hian, the founder and chief executive officer of Websense Sdn Bhd which
operates the LelongTips.com.my auction website, said overall the auction market
has seen a decline in listings over the years, with the total number of
listings down 8% at 29,883 in 2016, compared with 32,162 in 2015. The number of
listings was at 38,690 in 2014, and at 45,874 in 2013.

The northern
region recorded the largest year-on-year (y-o-y) decline at 12% last year,
followed by the central and east coast regions, which were each down 8% y-o-y,
while the southern region saw a 5% decline in the number of properties
auctioned.

The appreciation
of property prices has enabled financially stressed owners to sell their houses
or apartments at a profit, instead of putting it up for auction by the banks.

Furthermore,
banks are more willing to restructure mortgages that have been defaulted when
the value of the underlying property has gone up.

“As the price of
the property increases, the margin of financing for the housing loan will be
narrower [based on the market value]. So the banks can restructure the loan for
them. It is also in the banks’ interest to carry out loan restructuring as they
want to maintain a healthy loan portfolio,” Low explained.

“In terms of
loan default cases, there has not been an increase [according to the banks]. We
have been speaking with banks and they said that their non-performing loans’
(NPL) level overall has been steady, as interest rates remain stable,” said
Low.

He added that
there has also been an increasing amount of newly bought properties being put
up for auction, partly due to the various financing schemes offered by property
developers, including zero-interest schemes.

“Some buyers
take advantage of these schemes and end up having difficulty selling off the
asset, especially for big-ticket properties that are priced over RM1 million,”
he said.

On the other
hand, Low said transactions are active for cheaper properties, especially those
priced below RM400,000, as it is difficult to secure properties within this
price range in the current subdued market.

Leong Wye Hoong,
a licensed auctioneer with Leong Auctioneer Sdn Bhd, pointed out that the
increase in the number of high-valued properties, including offices, being put
up for auction is due to the oversupply in the office segment and continued
tighter lending conditions.

“The office
segment is seeing an oversupply, which has been driving up the number of
auction cases, while the tighter lending conditions have made it difficult to
secure financing for higher priced properties,” said Leong in an interview with The
Edge Financial Daily.

He added that
the success rate of these higher-end assets being auctioned off has also
fallen, as buyers are looking for cheaper units.

“Previously it
took one or two auctions to sell off these properties. However, last year it
took up to the third or fourth auction before these properties were bought.

“This is mainly
due to difficulty in securing loans, especially for those purchasing their
second property onwards. Banks usually give a lower margin of financing —
between 60% and 70% — making it more expensive to finance a purchase,” he said.