Mortgagee sales rising

/ The Edge Property |

March 24, 2017 5:00 PM SGT

A condominium unit at The Marina Collection in Sentosa Cove was to be put up for auction a third time by Edmund Tie & Co ( ET&Co) on March 29. However, it was sold prior to the auction, at a price believed to be around $3 million. The unit was a mortgagee sale, and the recent buyer, a foreign investor.

The latest transaction translates to a 42.8% discount to the previous owner’s purchase price of $5.24 million ($2,800 psf), based on a caveat lodged for the unit in December 2011. The 1,873 sq ft unit on the second level has a direct view of the marina and contains three bedrooms and a study. The unit is currently tenanted at a rental rate of about $6,000 a month.

Last December, a similar-sized unit on the third level (above the one that just sold) of The Marina Collection fetched $3 million ($1,602 psf) as well.

It shows that prices of condos at Sentosa Cove have finally bottomed. “These transactions demonstrate that at the current price levels, buyers are finding it attractive to come in,” says Joy Tan, head of auction at ET&Co. “And we’re getting a lot of calls for Sentosa Cove properties.”

View of One°15 Marina from The Marina Collection at Sentosa Cove

More penthouses as mortgagee sales

At ET&Co’s upcoming auction on March 29, eight out of 12 properties to be featured are mortgagee sales. Four of them are new listings. One is a duplex penthouse at Volari, a high-end, freehold condo on Balmoral Road. The 85-unit condo was completed in 2012.

The penthouse at Volari has a total floor area of 3,950 sq ft and comes with a private lift, four bedrooms and a study, as well as private pool and private enclosed space of about 1,453 sq ft. It also has direct views of the colonial Black & White bungalows at Goodwood Hill. The indicative price of the penthouse is $6.45 million ($1,633 psf), which is almost $1 million below the previous owner’s purchase price of $7.33 million ($1,856 psf) in November 2009.

A duplex penthouse at Volari is on the market for $6.45 million at ET&Co’s upcoming auction

“It’s a one-off deal, and the first mortgagee sale in the development,” says Tan. “This is a freehold condo in a tranquil environment in prime District 10, and near Orchard Road.”

Another penthouse making its debut at the auction is a duplex at The Foresta @ Mount Faber. The 141-unit private condo is on Wishart Road, a quiet road at the foot of Mount Faber. Yet, it is within walking distance of the Telok Blangah MRT station and a short drive from the CBD. The freehold, five-storey condo was completed in 2014.

A double-storey penthouse at The Foresta @ Mount Faber is up for sale with an indicative price of $2.3 million at the upcoming ET&Co auction

The Foresta penthouse has a floor area of 1,539 sq ft, including a 183 sq ft roof terrace, and contains three bedrooms as well as a study. A mortgagee sale, the unit has an indicative price of $2.33 million ($1,514 psf), which is on a par with the previous owner’s purchase price of $2.31 million in 2011.

Knight Frank’s auction on March 22 also saw the debut of a penthouse at The Beverly on Toh Tuck Road in District 21. The three-bedroom penthouse has a floor area of 2,734 sq ft, which includes the private pool and roof terrace. It was also a mortgagee sale and had an opening price of $2.08 million. As no bids were received, the property was withdrawn. The 118-unit The Beverly is a freehold, five-storey condo completed in 2012.

More motivated sellers

This month alone, half of the 72 properties put up for auction — by Colliers International, ET&Co, ERA, JLL and Knight Frank combined — are mortgagee sales, with another handful of properties by owners who are considered “motivated sellers”.

One such motivated seller is the owner of a unit at Altez. The 861 sq ft, one-bedroom loft has an indicative price of $1.67 million ($1,940 psf), which is 16% below the owner’s purchase price of $1.99 million ($2,314 psf) in February 2013. The unit was put up for auction by ERA on March 24. The 280-unit, 99-year leasehold Altez, located in the heart of Tanjong Pagar in the CBD, obtained its Temporary Occupation Permit in 2014.

At ERA’s auction, a 99-year leasehold unit on the first level of Caribbean at Keppel Bay made its debut as a bank sale or mortgagee sale. The 1,485 sq ft, three-bedroom unit has generated a lot of interest from potential buyers, many of whom are looking for a property for their own use, according to an ERA agent who declined to be named. The indicative price for the pool-facing unit is $1.9 million ($1,279 psf), which is 7.8% below the previous owner’s acquisition price of $2.06 million ($1,387 psf) in June 2011.

ET&Co’s Tan foresees the number of mortgagee sales rising this year if the economy continues to slow. “Some people thought it would be the shoebox apartments that would see a spike in mortgagee sales, but it is the larger units that continue to surface as mortgagee sales,” she says.

At Knight Frank’s auction on March 22, eleven of the 27 listed for sale were mortgagee sales. One was a three-bedroom apartment at the 102-unit Paterson Suites in prime District 9. The freehold condo, which has two 21-storey towers, was completed in 2010.

It was also the first mortgagee sale at Paterson Suites. The 1,679 sq ft, three-bedroom unit is on the 12th floor of one of the towers. The previous owner paid $4.65 million ($2,769 psf) for the apartment in January 2013. At Knight Frank’s auction on March 22, the unit had an opening price of $3.75 million and there was a counter offer of $3.6 million. However, the property was withdrawn without a sale.

Caught in a bind

The pain of Singapore’s high unemployment rate and economic slowdown is most visible at property auctions, as mortgagee sales continue to climb. The jobless rate for 2016 hit 2.1%, up from 1.9% in 2015 — the highest annual unemployment rate since 2010. Some of those who lost their jobs have defaulted on their mortgages, while beleaguered business owners have struggled to hold on to their assets, says Sharon Lee, Knight Frank’s head of auction.

Other distressed sales could be the result of a divorce, with couples having to sell their assets after the split, she notes. “The rise in mortgagee sales is due to a combination of factors.”

An increasing number of investors are caught in a bind because either their property has been vacant for a prolonged period or the monthly rents are insufficient to cover the mortgage payments, observes Lee. Many of these buyers entered the market when it was on an upturn between 2011 and 2013, before the total debt servicing ratio (TDSR) loan framework was introduced.

It is perhaps in recognition of the increasing hardship wrought by economic uncertainty that the government tweaked some of the property cooling measures on March 10. For instance, it cut the holding period for seller’s stamp duty from four to three years, and relaxed the TDSR for mortgage equity withdrawal loans with loan-to-value ratios of 50% or less.

Mortgagee sales of strata shops, office units

Mortgagee sales are also surfacing in the strata commercial segment. At the upcoming mixed-use scheme, EON Shenton, two adjacent strata office units will be put up for auction by ET&Co on March 29.

The two 99-year leasehold office units, each with its own attached toilet, have a combined strata area of 1,109 sq ft. Both are now mortgagee sales and have an indicative price of $2.68 million ($2,417 psf), which is 3% below the original purchase price of $2.77 million ($2,501 psf), according to a caveat lodged in May 2013.

EON Shenton contains a mix of residential units, strata offices and shops, and construction is currently underway. It is scheduled for completion in 2H2017.

Two adjacent strata office units at EON Shenton will be put up for auction on March 29 with an indicative price of $2.68 million

At JLL’s auction on March 23, an F&B shop at East Village on Upper Changi Road was put up for sale. The 366 sq ft unit, which is currently vacant, is now a mortgagee sale with an indicative price of $1.55 million ($4,235 psf). When the freehold strata retail complex was launched for sale in April 2012, many of the units, ranging from 108 to 420 sq ft, were snapped up at prices averaging $5,177 psf.

At that time, many small investors were diverted from the residential sector, owing to the imposition of the seller’s stamp duty (SSD) and additional buyer’s stamp duty (ABSD), says a property consultant who declined to be named. “Many of them snapped up such small shop units at the launch because they were looking at a quantum play, with absolute prices from $500,000,” she says.

Meanwhile, at Colliers International’s auction on March 30, a 409 sq ft shop unit in the basement of Thomson V Two will be put up for sale. The freehold unit has been transacted twice before. The first time was in June 2007, when the owner snapped it up for $654,000 ($1,599 psf). It changed hands in September 2013 for double the price, or $1.3 million ($3,178 psf). However, the property is now a mortgagee sale, with an indication price of $850,000, which is 34.6% below the 2013 purchase price.

Thomson V has two mixed-use blocks, both containing residential units on the upper levels, and strata shops on the first and basement levels. Thomson V One was completed in 2008, and Thomson V Two, in 2012.

Spike in mortgagee sales of strata factory units

The slowing economy has taken a toll on small businesses, and this is evident in the rising tide of mortgagee sales and receiver’s sales of strata industrial units. At Colliers’ upcoming auction, eight of the 14 properties are mortgagee sales. Half of these are for ramp-up factory units in new strata industrial developments.

Likewise, at Knight Frank’s auction, four of the nine industrial units for sale are mortgagee sales. At CT Hub 2 on Lavender Street, a Business 1 (B1) factory unit on the third floor is a mortgagee sale. The 1,873 sq ft unit has a 60-year lease, with effect from 2010. CT Hub 1 and 2 is a giant mixed-use scheme with 310 B1 factory units, 41 retail shops and 77 office units. The project was completed in 2015.

A Business 1 factory unit at CT Hub 2 was put up for mortgagee sale by Knight Frank

“With the economy remaining sluggish, more mortgagee sales are likely to surface, as both individual investors and business owners continue to face tough times,” says Mok Sze Sze, head of auction at JLL. However, for bargain hunters, there are more opportunities on the market.

This article appeared in The Edge Property Pullout, Issue 772 (Mar 27, 2017) of The Edge Singapore.

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mortgagee sales

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