THE property market is expected to face more foreclosures, especially for commercial units, experts said.
Property Auction House executive director Danny Loh believes that the increase will likely be caused by more housing projects being built under integrated development, the change of business models from brick-and-mortar to online platforms as well as slower economic growth in previous recent years.
Loh mentioned that last year, 23,505 units went for 39,340 rounds of auctions compared to 2018’s 21,741 units that went through 35,086 rounds.
Meanwhile, CGS-CIMB said in a research note, “We gather that the auction property market is likely to gain traction in future as financial institutions intensify their recovery efforts, increased handover of completed units and weaker property prices due to more auctions and a more competitive property market.”
In August 2020, the Public Sector Home Financing Board (LPPSA) said it would be offering more about 250 units in a public auction worth about RM40mil.
LPPSA provides subsidised financing facilities to public sector employees to buy houses.
Buy at your own risk
While property auctions can be a good place to look for properties at bargain prices, there are several risks to be aware of to prevent unnecessary problems.
- Poor due diligence. There are cases of people inspecting the wrong property, unaware of the title legality issues and over-reliance on professionals to obtain crucial information concerning the property. Bidders are then advised to have better due diligence such as performing title checks, obtaining the Proclamation of Sale (POS) from the auctioneer, inspecting the property externally and ascertaining the tenure, expressed conditions and other crucial information pertaining to the property.
- Losing your initial deposit. When it comes to a public auction, it is compulsory to prepare an initial deposit of 5-10% of the reserve price, depending on the LACA or High Court Auction. Therefore, it is strongly advisable to obtain a preliminary approval from a bank and engage a registered valuer to assess your maximum bid before the auction.
- Delivery of vacant possession. An auctioned property’s vacant possession lies in the responsibility of the bidder. If there are people occupying the property, it is your job to get them out after you successfully bid for the property. So, before you purchase an auctioned property, always find out if it is still occupied or not.
- Fake public auctions. Since there can be possibilities of fake advertisements of property auctions, it is always advisable to engage with a registered valuer, registered estate agent or licensed auctioneer to assist or represent you in auction purchases. – Nov 28, 2020
