Residential auction growing in popularity

It now includes new unoccupied residential units, which were unlikely to come up for auction before Covid-19 


THE pandemic has fuelled demand for auction properties — especially residential units — as the prices now tend to be lower than their market values. 

Knight Frank Property Hub MD Benjamin Tee said the popularity of the residential auction segment has shown a growing trend since the pandemic. 

“During the difficult period of the pandemic — especially after the six-month moratorium that allowed the house owner to delay repayment to the bank ended (in September 2020) — many more auction properties came into the market,” Tee told The Malaysian Reserve (TMR). 

According to him, the auction segment now also involves new unoccupied residential units, which were unlikely to be come up for auction before Covid-19 as most of the listings then were pre-occupied properties. 

However, he noted that residential properties always account for the majority of properties sold at auction, with an 80:20 ratio between residential and non-residential properties. 

“The auction property starts at a reserve price that is generally 10% to 15% below market. Successful bidders get a bigger house with the same budget as a smaller house outside an auction,” he said. 

This means that the buyers can save more by buying auction property while saving for renovation or furnishing the house. 

Tee says auction properties are still relatively cheaper than the completed sub-sale units

“The saving can be even bigger if the successful bidder is buying the property at the second or third round of auction as the reserve price will further reduce by 10% at the next auction,” he said. 

However, recently, the bidding auction rarely goes beyond the third auction, Tee added. 

“Most properties (recently) will be taken during the second or third auctions, unlike during the 2021 to 2022 period, where auctions will go beyond the fourth or fifth auctions,” he said. 

In recent years, auction residential properties recorded a steady increase in value of above RM1 million to RM5 million, especially since the pandemic. 

Prior to Covid-19, the auction residential segment was generally in the middle to low price range with the majority between RM300,000 to RM1 million. 

“Our observations on this are that the property value across the board has gone up quite a bit fair over the years, mainly due to the escalation of land and building materials cost, and the Covid-19 pandemic which has affected the population across all strata of the society, where in the past the property belonging to upper middle and higher net worth population were rarely gone under the hammer,” he said. 

Nonetheless, he views that the auction properties are still relatively cheaper than the completed sub-sale units. 

Meanwhile, the auctions residential bidders are among the end users as they are mostly the ones looking to buy houses for their private use. 

Meanwhile, the residential auction bidders are among the end users, mostly looking to buy houses for private use. 

People favour buying auction properties due to the clear timeline for getting possession of the property, opines Gerald

“More auction listings are brand new properties; therefore, it also attracted them (the bidders) to search for properties through the auction market,” he said.

According to him, many house buyers are young adults who are well-educated and highly informed to research through the auction property list in search of a good deal. 

On the other hand, Abrdn Islamic Malaysia Sdn Bhd CEO Gerald Ambrose views that auction property continues to gain popularity as there is a high chance of a successful sale. 

“Many vendors of residential properties who sell through a normal agent will not cut prices to find a buyer. Agents are reluctant to lower the prices because it might affect the prices of other units in the building or the areas,” Gerald told TMR. 

He said that people favour buying auction properties due to the clear timeline for getting possession of the property. 

However, according to a PropertyGuru Malaysia Market Outlook 2023, sellers seeking to sell their properties will likely find it taking longer to transact unless they lower prices at the macro level. 

“There is still significant competition from unsold properties that are newly completed. However, some segments, such as terraced homes, may see higher demand and sellers could transact at higher prices,” it said. 

Meanwhile, another challenge for sellers is finding a replacement home as asking prices are likely to be higher too.

  • This article first appeared in The Malaysian Reserve weekly print edition