Mortgagee sales of condos continue to climb

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/ The Edge Property
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May 6, 2016 10:00 AM SGT
At JLL’s auction on April 28, a 1,604 sq ft unit at OUE Twin Peaks was put up for sale. That was the first mortgagee sale at the prime District 9 condominium on Leonie Hill Road to date.
The mortgagee sale at OUE Twin Peaks was of a three-bedroom unit with a study, on the 18th floor of one of the 35-storey towers. The unit had an opening price of $4 million at the auction, which was $500,000 below the $4.5 million ($2,806 psf) transacted price four years ago, based on a caveat lodged in February 2012.
Still, there were no bids, and the property was withdrawn. Mok Sze Sze, head of auction at JLL, attributes the absence of bids for the unit to “competition from the developer”.
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OUE Twin Peaks was completed in February 2015, and the developer has to sell all 462 units by next February to avoid incurring extension charges under the conditions of the Qualifying Certificate. Last month, developer OUE Ltd launched a deferred payment scheme to attract buyers to the 99-year leasehold condo.
A three-bedroom unit at OUE Twin Peaks was put up for mortgagee sale by JLL on April 28
with an opening price of $4 million, but was withdrawn
Mortgagee sale listings to stay high The number of mortgagee sales (properties repossessed by banks or financial institutions) at auctions is expected to rise this year. In 1Q2016, there were 71 mortgagee sales at auctions. Residential property made up 48 units or over two-thirds of the total, according to Colliers International in its auction report.
Of the 48 residential properties, 33 were apartments and condos with sizes larger than 1,500 sq ft. “Lenders are expected to place more properties under the hammer for the rest of 2016, keeping the number of mortgagee listings elevated,” says Grace Ng, deputy managing director of Colliers.
The number of mortgagee sales for 2015 was 241. Assuming the number of mortgagee sales remains at the current level of about 70 a quarter — as seen in 4Q2015 and 1Q2016 — Ng reckons the total for 2016 is likely to exceed the 270 units seen during the 2008 global financial crisis.
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Ng attributes the higher number of mortgagee sales to a confluence of factors: a slowdown in the property market, weaker economy, volatile stock market and tough job market.
The number of foreigners who have traditionally been active in the prime condo space, especially in buying large units, has declined owing to the punitive additional buyer’s stamp duty. Singaporeans’ affordability has also been curbed by the total debt servicing ratio framework.
Buying at discounts However, buyers have been willing to jump in if they feel the discount is steep enough to offset the loan curbs and higher transaction costs.
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For example, a 2,551 sq ft four-bedroom unit at Silversea, also a mortgagee sale, was sold at JLL’s auction last week. It was the first time that the 99-year leasehold property was put up for auction, according to JLL’s Mok. The unit on the 19th floor is one floor below the penthouse level of one of the 20-storey blocks at Silversea. It had an opening price of $3.98 million, received a counteroffer of $3.7 million and was sold for $3.9 million ($1,529 psf).
A four-bedroom unit at Silversea was sold for $3.9 million at JLL’s auction on April 28
The latest sale price is $880,000 below the previous transacted price of $4.78 million ($1,875 psf) four years ago. The 383-unit Silversea is a redevelopment of the former Amberville privatised HUDC estate by Far East Organization and was completed in 2014.
Another unit at the condo also surfaced as a mortgagee sale at DTZ’s auction in March. It was a 1,507 sq ft, three-bedroom unit on the fourth floor of one of the 20-storey blocks. The opening price at the auction was $2.3 million ($1,523 psf), but the unit was withdrawn. The property is now available for sale by private treaty with a price tag of $2.38 million ($1,579 psf).
Large condo units, penthouses under the hammer More mortgagee sales of large condo units are headlining upcoming auctions. At Colliers’ auction on May 26, a penthouse at One Amber will be put up for mortgagee sale for the first time. The 3,164 sq ft simplex penthouse has four bedrooms and a study with partial sea views, according to Colliers’ Ng. The unit is drawing strong interest, she adds.
The indicative price of the penthouse, which is pegged to market valuation, is $3.8 million ($1,201 psf). This is already a $630,000 markdown from the previous owner’s purchase price of $4.43 million ($1,399 psf) five years ago, based on a caveat lodged for a sub-sale in January 2011.
A 3,164 sq ft penthouse with four bedrooms and a study at One Amber will be put up for auction by Colliers on May 26 with an indicative price of $3.8 million ($1,201 psf)
The 562-unit freehold One Amber is located at Amber Gardens and was developed jointly by Singapore Land, United Industrial Corp and UOL Group. It contains four 23-storey blocks and was completed in 2010.
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At Colliers’ upcoming auction this month, a 2,282 sq ft, four-bedroom unit at Orchard Scotts Residences in prime District 9 will be put up for auction for the first time. It is also a mortgagee sale. The unit has seen strong buying interest as it is a simplex and has a more efficient layout compared with some duplex units, says Ng.
The 99-year leasehold condo was developed by Far East Organization and completed in 2007. The indicative price for the unit that will be put up for auction is $3.4 million to $3.5 million. The previous owner, believed to be a foreigner, paid $5.67 million ($2,486 psf) for the unit at the peak of the market in September 2007, according to a caveat lodged with URA Realis.
There were two prior mortgagee sales at Orchard Scotts Residences. One was sold at a Colliers auction two years ago and the other was sold in a private treaty deal last year. “There has been quite a number of mortgagee sales as the project was launched in 2006 and many of the units were sold at the peak of the market in 2007, most of them snapped up by foreigners,” notes Ng. “This is also evident in some of the other luxury condos that were launched in the prime districts during the last property boom, especially at Sentosa Cove.”
At Sentosa Cove, the 91-unit Turquoise saw a handful of units put up as mortgagee sales at auctions over the last two years. The latest transaction at the 99-year leasehold waterfront condo was for a 2,153 sq ft, three-bedroom unit on the third floor of one of the blocks. It fetched $3 million ($1,400 psf) in January. The unit was purchased for $5.65 million ($2,623 psf) in November 2007.
At Knight Frank’s upcoming auction on May 18, a 2,088 sq ft, three-bedroom unit on the third floor of a neighbouring block at Turquoise will be put up for sale. The unit was purchased for $5.46 million ($2,613 psf), according to a caveat lodged in October 2007. It will be the first time the unit has been put up for auction as a mortgagee sale. The guide price is said to be $1,500 to $1,600 psf.
Older freehold condos on the radar Older apartment units are also emerging at auctions as mortgagee sales. At Colliers’ upcoming auction is a mortgagee sale of a 1,550 sq ft, three-bedroom unit on the 24th floor of Lucky Plaza. The freehold unit has an indicative price of $2.5 million to $2.6 million, which translates to $1,613 to $1,677 psf. The unit last changed hands in a resale for $1.38 million ($890 psf) in November 2005.
Although Lucky Plaza is an ageing apartment block, the unit is attracting investor interest given its location on prime Orchard Road, relatively large size and freehold tenure, says Ng. The project was developed by Far East Organization and completed in 1981. The 88 apartments span the ninth to 30th storey of Lucky Plaza, while the shopping mall is located on the first six levels.
The last time an apartment at Lucky Plaza was put up for mortgagee sale was more than 10 years ago and was sold at a Colliers auction, says Ng.
At Knight Frank’s auction last month, a 3,390 sq ft, four-bedroom penthouse at Le Crescendo was put up for mortgagee sale with an opening price of $2.6 million ($767 psf). The property was withdrawn and will be put up for auction a second time on May 18. The guide price is now between $2.6 million and $2.9 million.
The penthouse was purchased by the previous owner for $2 million ($590 psf), according to a caveat lodged in August 2009. The 228-unit freehold condo on Paya Lebar Road was developed by GuocoLand and completed 10 years ago.
A 3,390 sq ft penthouse at Le Crescendo was put up for sale at Knight Frank’s auction last month. It will be put up for sale in the May 18 auction with an indicative price of $2.8 million to $3 million.
Condos in the $1 mil range At Knight Frank’s upcoming auction, a three-bedroom unit on the second floor of Sky Vue will be put up for mortgagee sale. The guide price for the unit is said to be in the range of $1,300 to $1,350 psf. The 694-unit, 99-year leasehold condo in Bishan is scheduled to be completed by the end of this year. Sky Vue is developed jointly by CapitaLand and Mitsubishi Estate Asia. About 90% of the units have been sold so far.
Generally, smaller 99-year leasehold condo units in the suburbs priced in the $1 million range tend to be snapped up because the absolute price is more affordable, says JLL’s Mok. Two such units were sold prior to JLL’s auction on April 28. Both were mortgagee sales and were to debut at the auction for the first time.
One of them is a 1,206 sq ft unit with three bedrooms and a study on the third floor of Tanamera Crest in Bedok North. The 288-unit, 99-year leasehold condo was developed by CapitaLand and completed in 2004. The previous owner purchased the unit in a resale for $1.3 million ($1,078 psf), according to a caveat lodged in February 2013, which means that he or she would be subjected to a 4% seller’s stamp duty. This would mean a loss of $400,000 as the selling price is believed to be below $1 million.
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The other is a 1,077 sq ft unit with two bedrooms and a study on the first floor of Seletar Park Residence. The 276-unit, 99-year leasehold condo was developed by Tuan Sing Holdings and completed last year. The previous buyer paid $1.115 million ($1,036 psf) for the unit in April 2012, based on a caveat lodged. The latest sale price is believed to be above $1 million, according to sources.
A 1,077 sq ft unit with two bedrooms and a study at Seletar Park Residence was snapped up prior to JLL’s auction on April 28
One in two condos a mortgagee sale A total of 53 condos and apartments were put up for auction in 1Q2016. Of these, 28 units or 52.8% were mortgagee sales, according to Sharon Lee, head of auction at Knight Frank. This means that one of every two non-landed properties put up for auction in 1Q2016 was a mortgagee sale.
More mortgagee sales are expected as the economy worsens and more people lose their jobs or struggle to repay their mortgage, says Collier’s Ng. However, for the cash rich with at least $2 million to spare, it is a good time to shop at auctions. Those who are looking at prime condos tend to be in this category, she adds.
Mortgagee sales accounted for 52.8% of the condos and apartments that were put up for auction in 1Q2016, according to Knight Frank
This article appeared in the City & Country, Issue 727 (May 9, 2016) of The Edge Singapore.