More landed homes under the hammer

By Michael Lim / The Edge Property | September 16, 2016 10:00 AM SGT
Bearish economic and market sentiment as well as the recent spate of retrenchments and corporate restructurings in the financial and oil and gas (O&G) sectors may have been among the reasons why more landed homes have been put up for mortgagee sale this year.
In 1H2016, a total of 66 houses were put up for auction, according to data from Knight Frank Research. Of the 66 properties, 28, or 42%, were mortgagee sales. Meanwhile, in 1H2015, only 16 of 83 houses (19%) put up for auction were mortgagee sales. The number of houses put up for mortgagee sale has therefore increased 75% y-o-y, according to Sharon Lee, head of auction at Knight Frank.
“Some of these homes could belong to owners or directors of companies in the financial or O&G as well as related sectors, who may be forced to liquidate to ease their cash flow,” says Lee. “Some of these houses could also have been used as collateral for their businesses.” This is especially the case for Good Class Bungalows and larger detached and semi-detached houses. The sale of these properties is usually “a last resort”, as they are typically their primary residence, she adds. “They will usually sell their investment properties first.”
Those who are unable to service their mortgage or secure a buyer for their properties will have their properties repossessed by the bank. The banks in turn will put up the properties for sale by auction as it is the most transparent mode of sale. If the property is still not sold after being put up for auction a number of times, the bank could either conduct a closed tender or private-treaty sale.
This 13,189 sq ft site on Branksome Road could be subdivided and redeveloped into two 2½-storey detached houses
branksome house
On the market
One such property that is being sold by the bank is a freehold bungalow in the Tanjong Katong area owned by the former managing director of liquidated spice and nut trader Pars Ram Brothers. The freehold property on Branksome Road was first put up for auction by Edmund Tie & Co (ET&Co) in March, and in April for the second time. The opening price at both auctions was $16 million ($1,213 psf). While the property generated a lot of interest, it failed to find a buyer. It was put up for auction a third time, and this time, the marketing agent was Knight Frank. The opening price was $15.9 million ($1,205 psf). The auctioneer received a bid of $15 million after the auction, but it was below the bank’s reserve price.
According to Lee, the site can be subdivided and redeveloped into two 2½-storey detached houses with a built-up area of 8,000 sq ft each. The property will be put up for auction again on Sept 20.
Knight Frank is marketing another detached house on Branksome Road. It is a 2½-storey house with a built-up area of 7,900 sq ft on a freehold site of 6,700 sq ft. The owner had spent $4 million redeveloping the house six years ago. The property has seven bedrooms and a swimming pool. The owner has put the property on the market for sale by private treaty, with a guide price of $12.8 million ($1,910 psf).
This uncompleted 3½-storey bungalow on Mimosa Crescent was sold for $9 million ($1,103 psf) in a private-treaty deal, below its $11.5 million guide price
mimosa crescent house
Last month, JLL sold two landed homes by private treaty. Both were mortgagee sales. One of the properties was a 3 ½-storey, six-bedroom detached house on Mimosa Crescent in Seletar Hills. The property has a built-up area of 16,200 sq ft and a land area of 8,157 sq ft. It was first put up for auction in May by JLL at an opening price of $11.5 million. It was one of four uncompleted houses by boutique developer C&C Development, which was wound up in July.
The property was put up for auction again in June with an opening price of $11.5 million. It was finally sold for $9 million ($1,103 psf) last month by private treaty, according to JLL’s head of auction, Mok Sze Sze, who brokered the sale.
The second house that was sold by JLL last month was a double-storey corner terraced house on Lorong Kismis in Toh Tuck Hill Estate. The property, which sits on a freehold site of 2,781 sq ft, fetched $3.2 million ($1,158 psf). This was about 8% below the opening price of $3.45 million at the auction in June.
JLL is putting a freehold three-storey detached house at Eng Kong Garden up for auction on Sept 22
eng kong road house
JLL will be putting up a freehold three-storey detached house at Eng Kong Garden for auction on Sept 22. The house, with a build-up area of 6,032 sq ft, sits on a 4,316 sq ft site. The property is a mortgagee sale and has an indicative price of $6 million ($1,390 psf).
Over at ET&Co, a freehold double-storey semi-detached home on Jalan Tarum, off Sembawang Hills Drive, was put up for auction on Aug 31. The five-bedroom property sits on a land area of 3,461 sq ft and has a build-up area of 4,263 sq ft. It had an opening price of $3.9 million ($1,126 psf) at the auction, but as there were no bids, the property was withdrawn.
It will be put up for auction again on Sept 28, according to Joy Tan, head of auctions at ET&Co. It will be the fourth time for the property, which was first put up for auction in April by Knight Frank, with an opening price of $4.2 million.
The number of homes being put up for mortgagee sale has gone up, but the likelihood of a sales conversion for detached and semi-detached homes in non-prime residential areas remains slim, owing to the high asking prices of above $1,000 psf, while buyers’ expectations have actually dropped quite a bit, says Tan. The asking price remains high because the valuation for these properties is still high and has yet to drop, she adds.
“Most of the buyers who approached us after the auction were offering $800 to $900 psf. They will only pay a slight premium of $1,000 psf if the house is done up nicely and requires only minor A&A [alteration and addition] works,” says Tan.
Colliers International, meanwhile, will be putting up a house for sale at its upcoming auction on Sept 21. The single-storey semi-detached house on Dunbar Walk sits on a freehold site of 4,614 sq ft and can be rezoned as a detached house given that it has a land area of more than 4,306 sq ft, the minimum land area for a detached house under URA guidelines. The property is a trustee sale and has an indicative price of $4.8 million ($1,040 psf). Given that the site can be redeveloped into a detached house, the property will attract families in the neighbourhood, or those who want to upgrade from a smaller to a bigger landed property, according to Colliers.
At ET& Co’s latest auction, this semi-detached house on Jalan Tarum, which had an opening price of $3.9 million, received no bids
jalan tarum house
Rise in number of owner’s sales
The number of landed homes put up for auction has been on the rise. The total number in 2013 and 2014 was around 78 yearly. That figure more than doubled to 166 last year. In 1H2016, 66 landed homes were listed for auction.
One of the main reasons for the increase in owner’s sale of landed homes at auctions is that many of them had been trying to sell their property in the secondary market without much success. And having failed to find a buyer after more than year, many have turned to auctions as an alternative, says Knight Frank’s Lee.
Another reason is that these houses have also seen a softening in demand from expatriates looking to lease them as the global economy has weakened. “Some owners are unwilling to ride it out over the next few years,” says ET&- Co’s Tan. “Their concern is that things could worsen further next year, and that could take a toll on their asking price.”
This article appeared in The Edge Property Pullout, Issue 746 (Sep 19, 2016) of The Edge Singapore.