The e-commerce market in Singapore is growing fast. According to Statista Portal, Singapore's e-commerce revenue will total US$3.74 billion by end-2018, and with an expected annual growth rate of 10.1 per cent, is likely to result in a market volume of US$5.5 billion by 2022. To date, electronics and media form the largest share of the e-commerce pie.
Unsurprisingly, online transactions of a large asset class like real estate have yet to pick up pace in Singapore.
While many Singaporean buyers may be concerned with transacting big-ticket items online, the modes via which properties can be transacted are likely to evolve, as technology plays a growing role in businesses.
In the international arena, however, transacting real estate online has become increasingly prevalent.
In the United States, auctions of properties shifted online over eight years ago, with companies such as Auction.com holding claim to 4.4 million registered buyers, selling 329,000 homes to date and recording US$39 billion in sales.
Closer home, China saw a surge of online property sales, with realtor Seatune noting that distressed real estate listings went up to a record 1.3 trillion yuan (S$260 billion) in 2018.
Since the 1940s, auctions have been used as a mode to sell properties in Singapore. In 2018, the total number of auction listings (excluding properties sold before and after auctions) increased 30.6 per cent quarter-on-quarter to total 380 in Q4 2018, supported by more owner listings of retail and industrial properties.
Still, the bidding model long associated with auctions can be replicated online, with many benefits. Foremost is transparency.
Online auctions encourage transparency, as the seller can tap on bidding behaviour data to determine if the set baseline prices have been overestimated.
This in turn, further aids price discovery. In the event that properties are not successfully sold, the auction process can also serve to provide positive publicity or exposure, paving the way for a future sale.
In a 2006 study by the National University of Singapore, approximately half of the properties that were unsuccessful at an auction eventually sold via private negotiation, with the majority of subsequent sales occurring within 180 days of the auction.
Next, online transactions afford convenience. With a digital process, one can easily transact a home at one's convenience no matter the time or place, and without the additional hassle of paperwork. With further enhancement and collaboration, there is also great potential for a more seamless transaction process, to provide options for e-conveyancing and direct loan applications.
While concerns over the security of online transactions necessarily linger, online platforms can potentially be connected to secure sites to verify the eligibility of buyers. On the side of agents, online platforms can add a layer of safety to help screen out buyers that have contravened regulations under the Anti-Money Laundering and Terrorism Financing Act.
Nevertheless, buyers and sellers are likely to weigh the monetary benefits between employing auctions and private negotiations. In a study that compared the performance of auction sales and negotiated sales in Singapore, the choice of sales mechanism to obtain higher price premiums largely depends on property type and market conditions. Auctions were found to generate higher price premiums in up markets, and for higher priced properties. While there are a few agencies in the Singapore market exploring the online process, there still exists a gap between the online transaction and the offline procedures.
Nevertheless, online auctions could become a reality, with purchasing property the digital way set to become a new norm for buyers and sellers, empowering transactions at the right price. Additionally, the technology can enable agents, encouraging innovation and improvement of their service offerings.
Adapted from: The Business Times, 23 February 2019