Home prices hammered at auctions

By Feily Sofian

/ The Edge Property |

February 26, 2016 11:26 AM SGT

These are trying times, and the increase in the number of properties going under the hammer hardly raises any eyebrows. However, auction data compiled by property research house DTZ reveals some interesting trends.

Our analysis shows prices have also been hammered. In January, a 1,539 sq ft high-floor unit at The Serenade @ Holland, a 99-year leasehold condominium completed in 2004, is understood to have been successfully auctioned off for $1.7 million, or $1,104 psf. The price is 5% to 8% below 2015 prices.

A comparable low-floor unit in the development changed hands at $1,189 psf in August, while another unit on a high floor found a buyer at $1,202 psf in April. The discount to market prices is a double whammy given that property prices have softened since peaking in 2013.

The property first surfaced on the auction scene last September with an opening price of $1.88 million and attracted an opening bid of $1.6 million. No deal was concluded and the property reappeared the following month with a lower opening price of $1.8 million. Again, there was no taker.

A 1,539 sq ft high-floor unit at The Serenade @ Holland is understood to have been successfully auctioned off in January for $1,104 psf, reflecting a 5% to 8% discount to 2015 prices. More value deals here.

’Tis the season to pick up luxury homes. In December, a 2,174 sq ft unit at Orchard Scotts Residences went under the hammer for $3.06 million, or $1,407 psf. Based on the property’s preceding caveat, the seller purchased the unit for $4.23 million, or $1,945 psf, in February 2011. The transaction would have resulted in a hefty loss of over $1 million.

Another luxury homeowner also took a huge loss. His 2,013 sq ft unit at St Thomas Suites, a freehold condo completed in 2010, was auctioned off for $3.6 million, or $1,788 psf, last December. Tracing the unit’s previous caveat in February 2012, the sale resulted in a $664,000 loss for the seller, excluding a 4% seller’s stamp duty.

Similarly, the transaction reflects a 5% to 8% discount to the market value of the unit. In September, a comparable unit located two floors above fetched $3.93 million, or $1,952 psf.

The property was first listed for auction in November with an opening price of $3.85 million and attracted a top bid of $3.55 million. With no deal concluded, it was again put up for auction in December with a lower opening price of $3.7 million.

Last December, a unit at St Thomas Suites was auctioned off for $3.6 million, or $1,788 psf, resulting in a $664,000 loss for the seller, excluding seller’s stamp duty. Interested in this project? Click here.

The highest bid at auctions may be less than the property’s reserve price, but the seller would have to accept the offer before the deal can be sealed. All three properties were auctioned as mortgagee sales.

According to DTZ, some homeowners face difficulty in financing their mortgages owing to the economic slowdown and softening leasing market. The number of properties listed for mortgagee sales rose from 47 units in 2014 to 87 in 2015. In comparison, there were only nine properties listed for mortgagee sales in 2012 when the market was trending up.

More properties were also listed for owners’ sales, says DTZ. In 2015, 135 properties were listed for auction as owners’ sales, up from 77 in 2014. Lee Naijia, DTZ’s head of Southeast Asia research, says, “Sudden shocks in the equity markets tend to be a precursor of more auction listings, as owners need to adjust their financial position. This will offer prospective homebuyers a window of opportunity to acquire homes at reasonable prices.”

Success rate of mortgagee sales only 29% in 2015 as buyers expected a steep discount

According to DTZ, the success rate of mortgagee sales in 2015 was only 29%. Lee attributes the sluggish number to the fact that buyers who attend auctions tend to expect a steep discount.

On the other hand, banks that put up properties for mortgagee sales are inclined to list them at market prices to avoid any legal contentions. It might take several rounds of adjustments in the sellers’ expectations before a deal can be concluded.

Lee expects the success rate of mortgagee sales to remain largely unchanged going forward. While sellers are gradually lowering their expectations, the market conditions have also deteriorated, further denting buying sentiment.

Separately, a property auction tends to attract properties with a large price quantum. According to DTZ, the number of apartments with strata area above 2,000 sq ft increased from 17 units in 2014 to 40 units last year.

DTZ data also shows a rising number of landed homes and industrial properties listed for auction. A total of 53 landed homes were listed for auction in 2015, up from 39 in 2014.

Lee expects the success rate of mortgagee sales to remain largely unchanged going forward.

Nine industrial properties were put up for mortgagee sales in 2015 and one was successfully sold. A property at Techniques Centre in Ubi Crescent is understood to have fetched $460,000, or $407 psf, at an auction last November. The price reflects a 12% discount to the price of a comparable unit in the development, which changed hands at $460 psf in April 2015.

This article appeared in The Edge Property Pullout, Issue 717 (February 29, 2016) of The Edge Singapore.

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