More distressed sales expected at luxury condos
It should be reassuring that property agents still consider incidences in which condominiums are sold at 20% to 30% below their purchase price to be as in frequent as an MRT breakdown. Many still insist that such transactions are “one-off” and not representative of the normal market.
“During the global financial crisis, there were similar deals that were done well below market price, but they were also few and far between,” remarks Eric Tay, associate group division director of PropNex Realty. “And these distressed sales are not representative of the rest of the market. For buyers, it’s a good opportunity to find bargains."
One such deal was the sale of a unit on the 20th floor in one of the twin towers at One Shenton condo for $2.36 million, according to a caveat lodged with URA Realis on Sept 21. Based on the floor area of 1,582 sq ft, the price of the three-bedroom unit is $1,491 psf, which is a record low in terms of psf price at One Shenton.
A 1,582 sq ft, three-bedroom unit at One Shenton was sold at all-time-low of $1,491 psf
The transacted price is just 4.8% lower than the price tag of $2.48 million ($1,567 psf) listed by an agent in early September. Compared with the seller’s purchase price of $3.39 million ($2,140 psf) in October 2007, the deal represents a 30.3% drop in price. According to an INLIS filing, the seller was a Hong Kong company.
When listed property giant City Developments Ltd (CDL) previewed the 341-unit condo project in January 2007, prices range from $1,532 to $2,757 psf. “Most of the units were sold at around $2,000 psf then,” says Ku Swee Yong, CEO of Century 21.
Visiting new lows
The three-bedroom unit may have been the first at One Shenton to be sold below $1,500 psf this year, but two other resale deals had traded between $1,500 and $1,600 psf. One was a 1,098 sq ft, two-bedroom unit on the 28th floor that changed hands for $1.75 million ($1,594 psf) in early August. That same unit had fetched $2.24 million ($2,043 psf) back in February 2007, according to caveats lodged. This means the price of the unit has fallen some 22% after a holding period of eight years. Meanwhile, a 1,819 sq ft four-bedroom unit on the 16th floor was sold for $2.85 million ($1,567 psf) in May. There was no prior caveat lodged for the unit.
Most of the individual owners are still asking for prices in the range of $1,800 psf to $2,000 psf for their units, says senior sales director of DTZ, Gina Chan, who is marketing several units at One Shenton. She points to two 581 sq ft one-bedroom units that were sold in August for $1,819 psf and $1,892 psf respectively.
According to Chan, CDL still has less than10 units available for sale at One Shenton, and the asking prices for these units are still around $2,000 psf. The 341-unit One Shenton is a high-end 99-year leasehold twin tower condominium development completed in 2011.
The 1,111-unit The Sail twin towers was also developed by CDL and was the first residential project at Marina Bay to be launched. One of the skyscrapers is the 70-storey Tower 1 which was launched in September 2004 at an average price of $950 psf, while the 63-storey Tower 2 was launched a year later in October 2005 at an average of $1,850 psf. The 99-year leasehold towers were completed in 2008.
This year saw four transactions at The Sail at prices in the $1,600 to $1,700 psf levels. The latest was a unit on the 32nd floor of Tower 2 that changed hands for $1.445 million ($1,678 psf), according to a caveat lodged on Sept 23.The price is 11.7% below the seller’s purchase price of $1.64 million ($1,900 psf) in a subsale in December 2007. “The last time prices at The Sail were at such levels was back in 2009 during the global financial crisis,” recalls Century 21’s Ku.
‘Winning the lottery of distressed sales’
“Transaction volume has shrunk to such an extent that such deals tend to float up,” says Alan Cheong, head of research for Savills Singapore. “The market environment now favours the rich, as they are in a better position to get a good bargain, given their ability to buy with cash.” Such deals are still sporadic, however, and are almost equivalent to “winning the lottery of distressed sales”, he adds.
Based on caveats lodged so far, the average price of units sold at The Sail this year was $1,915 psf, or 13.6% lower than the average price of $2,216 psf for units sold in 2014.
A 1,755 sq ft, three-bedroom-plus-study unit on the 63rd floor in Tower 1 of The Sail was put up for mortgagee sale at DTZ’s auction on Sept 29. The unit had an opening price of $3.98million ($2,268 psf), received an opening bid of $3 million ($1,709 psf), and was withdrawn. The property will be put up for auction by DTZ again on Oct 21. The indicative price is likely to be similar to the opening price at the recent auction, says Joy Tan, head of auctions at DTZ.
Before the unit was foreclosed by the bank, the previous owner paid $5 million ($2,850 psf) for it five years ago. Even at $3.98 million, itis 20.4% below the seller’s purchase price in May 2010. Prior to that, the unit had changed hands in three sub-sales over a four-year period: In May 2009, it was sold for $3.04 million ($1,730 psf); in June 2007, it fetched $4.95million ($2,821 psf); and, in 2005, it went for $2.2 million ($1,254 psf). The first buyer paid $1.77 million ($1,008 psf) for the unit when Tower 1 was launched 11 years ago at end-2004.
Larger units, steeper discounts needed
DTZ’s auction on Sept 29 also featured two units at Marina Bay Suites and a unit at Orchard Scotts, believed to be owned by a Malaysian national. The two units at Marina Bay Suites are four-bedroom apartments of 2,680 sq ft each and were purchased in May 2010.Both units have bayfront views: The eighth-floor unit was purchased for $7.11 million ($2,654psf) and the 11th-floor unit for$7.18 million ($2,678 psf).
The owner is a genuine seller, says DTZ’s Tan. This is reflected in the recent opening price of $5.5 million ($2,052 psf) for the eighth-floor unit and $5.75million ($2,146 psf) for the 11th floor unit of Marina Bay Suites at the September auction. These prices are already at a 22.7% and19.9% discount to his original purchase prices respectively. Yet, there were no takers at the auction.
The 221 units in the 66-storey luxury residential tower, Marina Bay Suites, are fully sold. The most recent sale by the developer was that of a 2,691 sq ft, four-bedroom unit on the 49th floor that fetched $7 million ($2,601 psf) just last month, according to a caveat lodged with URA Realis. The 99-year leasehold Marina Bay Suites is part of Marina Bay Financial Centre and was completed in 2013. It was jointly developed by Cheung Kong (Holdings), Hongkong Land and Keppel Land.
At Orchard Scotts, the Malaysian owner’s unit is 2,282 sq ft and has four bedrooms. It was purchased for $5.482 million ($2,402 psf) in December 2009, according to a caveat lodged with URA Realis. At DTZ’s auction, the unit had an opening price of $3.625 million ($1,589 psf), which is already 33.9% below the original purchase price.
Some property agents reckon the eventual losses may not be as high, owing to currency gains for the Malaysian owner. In 2010, when the units were purchased, the ringgit was at 2.33 to the Singapore dollar. Today, it is hovering at 3.06, which is 30% higher, based on the exchange rate.
The two most recent transactions at Orchard Scotts were mortgagee sales that had been put up for auction. One was a 2,110 sq ft, four-bedroom unit that was sold for $3.3 million ($1,564 psf) at an auction by Colliers in August last year. The previous owner’s purchase price was $4.388 million ($2,080 psf) in May 2010, which represents a 24.8% loss. In theother mortgagee sale, a 1,873 sq ft, three-bedroom unit changed hands in June this year for $2.8 million ($1,495 psf), or 22.7% lower than the owner’s purchase price of $3.62 million ($1,935 psf) in 2011.
Orchard Scotts is a 99-year leasehold condo developed by Far East Organization in prime District 9.The 387-unit project comprises three towers and was completed in 2007. One of the towers has been converted into serviced apartments.
Meanwhile, on Grange Road in District 10 isthe 110-unit high-end condo project Cliveden at Grange. The freehold project was developed by CDL and completed in 2011. In November 2007, CDL announced that it had acquired 44 units in two of the towers at Cliveden jointly with US-based Wachovia (now Wells Fargo) for $432.4 million. The average purchase price of the units worked out to $3,750 psf then.
The most recent transaction at Cliveden was in April 2008, when a 2,842 sq ft unit on the 10thfloor of the first tower was sold for $11.12 million ($3,914 psf). The buyer, believed to be a high-net worth Asian investor, is now looking to divest the unit. At Colliers’ auction on Sept 30, it had an opening price of $8 million ($2,815 psf). That price already reflects a 28% discount to the owner’s purchase price seven years ago.
“The difficulty for buyers is not so much the price psf but the quantum,” says Joseph Tan, CBRE’s executive director of residential services. “While there is interest, at prices above $5 million, the pool of buyers is a lot smaller, with the TDSR [total debt servicing ratio] and [additional buyer’s stamp duty] as well as other property cooling measures still in place.”
List of condos in prime districts with the highest sales volume
Project Name | Tenure | Completion | Avg Price (S$ psf) | Sales Volume | Avg Rent (S$ psf pm) | Rental Volume | Rental Yield (%) |
|---|---|---|---|---|---|---|---|
Freehold | 2003 | 1,439 | 8 | 3.2 | 38 | 2.6 | |
99 years | 1998 | 1,228 | 7 | 3.5 | 17 | 3.4 | |
Freehold | 1997 | 1,452 | 6 | 3 | 18 | 2.5 | |
Freehold | 2008 | 1,376 | 6 | 3.4 | 13 | 3 | |
99 years | 2004 | 1,448 | 6 | 4.5 | 43 | 3.8 | |
99 years | 1998 | 1,312 | 6 | 3.6 | 24 | 3.3 |
Source: URA, The Edge Property
More distress in Sentosa Cove?
At the waterfront residential enclave of Sentosa Cove, a four-bedroom unit at the luxury condo Turquoise will be put up for auction by Knight Frank on Oct 22.
The fifth-floor unit measures 2,433 sq ft and is situated just one floor below the penthouse. It has views of the waterfront and even comes with a private berth. The owner paid just under $6.6 million ($2,712 psf) for the unit when Turquoise was launched in October 2007.
The unit at Turquoise was repossessed by the bank and will be placed as a mortgagee sale at the auction later this month. The guide price is said to be $4 million to $4.1 million, reflecting an average price of $1,644 to $1,685 psf, which is in line with recent transactions.
This is not the first distressed sale at the 91-unit Turquoise. The most recent transaction involved a 2,185 sq ft, three-bedroom unit on the fifth level of the adjacent block. I was sold for $3.7 million ($1,693 psf), according to a caveat lodged in early September. The original purchased price in late 2007 was just under $6.04 million ($2,763 psf).
Turquoise also set a benchmark low in July last year when two 2.777 sq ft, four-bedroom units on the second and third levels were sold for $3.88 million ($1,397 psf) and $4.03 million ($1,450 psf) respectively. Both were mortgagee sales.
Generally, most owners of luxury residences in prime districts are still asking for “market prices” and are prepared to offer discounts of up to 5% to 10%. Some buyers continue to make lowball offers. “That’s why there are so few deals because of the mismatch between sellers’ and buyers’ asking prices,” says Bruce Lye, managing partner of SRI500, a division of SLP International.
As economy sputters and financial markets continue to deteriorate, Savills’ Cheong expects to see more distressed sales surfacing. “Because of the TDSR, rising interest rates, some home owners find that they can’t finance their property and therefore have to offload,” he says. “So, it could be locals as well as foreigners who are selling at such prices.”
This article appeared in the City & Country of Issue 698 (Oct 12, 2015) of The Edge Singapore.
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