Mounting distress
By Cecilia Chow
SINGAPORE: High-end condos in prime districts have dominated mortgagee sales this year. Signs point to more of such sales in 2015, especially of sizeable apartments and shoeboxes in the mid-tier and mass-market segments.
While Marina One Residences saw strong sales in the past fortnight, the rest of the luxury condo market continued to struggle to find buyers.
The latest sign of distress is the emergence of two mortgagee sales at The Laurels on Cairnhill Road.
The two properties will be put up for auction by Colliers International on Oct 29.
This is the first time that units at The Laurels, a 229-unit luxury condo on Cairnhill Road, have been put up for mortgagee sale by a local bank.
Developed by Sing Holdings, the freehold condo is fully sold, and was completed late last year.
When the project first previewed in mid-March 2010, prices ranged from $2,800 to $3,200 psf.
Both mortgagee sale units at The Laurels are three-bedroom apartments.
The unit on the first level overlooks the swimming pool and has an indicative price of $4.2 million to $4.5 million.
This translates into $2,181 to $2,336 psf, which is a lower price per sq ft as the unit has a floor area of 1,926 sq ft, but the private enclosed space accounts for some 753 sq ft, explains Grace Ng, deputy managing director and auctioneer at Colliers International.
The other mortgagee sale unit is on the 11th floor, and slightly smaller at 1,302 sq ft.
It has an indicative price of $3.8 million to $4 million, or roughly $2,919 psf to $3,072 psf.
There are growing signs that some owners of high-end condo units are looking to exit, even if it means selling at prices below their original purchase price.
This is reflected in a recent subsale of an 883 sq ft, two-bedroom unit at The Laurels.
It changed hands for $2.15 million ($2,436 psf) at end-August.
The seller had purchased the unit in April 2010 for close to $2.5 million ($2,830 psf), according to a caveat lodged with URA Realis.
This means the sale price for the unit was about $348,000 (13.9%) below the original purchase price.
Making an exit
Another sign of further bloodletting in the Cairnhill area was seen at The Promont, a single 17-storey block with just 15 three-bedroom units of 2,013 sq ft each.
The high-end condo at Cairnhill Circle was developed by Keppel Land, and launched at completion in 2009.
The project is fully sold.
One of the buyers, an Australian investor in the mining business, paid $4.27 million ($2,122 psf) for the 16th floor unit five years ago.
He is said to have offloaded the property in February this year for $3.1 million ($1,540 psf), which is about $1.17 million (27.3%) less than his original purchase price.
Interest in the high-end segment has faded.
“It’s very quiet in this spectrum of the market,” concedes Jerry Tan, founder and managing director of JTResi, a specialist in marketing luxury homes.
“People are taking their time to buy, and are only prepared to commit to a purchase if there is a real reason to.” Distressed sales are also emerging elsewhere in the prime districts of 9 and 10.
A unit at Orchard Scotts was put up for mortgagee sale.
It was a 2,110 sq ft loft unit, and was sold for $3.3 million ($1,564 psf) at Colliers’ auction on Aug 27.
Orchard Scotts is located on Anthony Road, just off Cairnhill Road.
The 99-year leasehold condo was developed by Far East Organization and completed in 2007.
Now, another unit at Orchard Scotts will be up for auction on Oct 30 by JLL.
The unit, also a mortgagee sale, is a 1,873 sq ft, three-bedroom apartment on the fourth level of the residential block.
The indicative price is $3 million ($1,602 psf), which is below the previous owner’s original purchase price of $3.62 million ($1,935 psf) in 2011, according to a caveat lodged with URA Realis.
In the prestigious neighbourhood of Orange Grove Road, a 2,702 sq ft, four-bedroom unit on the eighth floor of D’Grove Villas is said to have changed hands recently for $4.65 million ($1,721 psf).
The price is $750,000 lower than the last transaction at D’Grove Villas, when a similar sized unit on the 10th floor was sold for $5.4 million ($1,999 psf) in 2012.
“Some owners are now convinced that prices are likely to spiral downward, and want to exit before prices fall even further,” observes Eugene Huang, director of Redbrick Mortgage, an independent mortgage broker.
Creeping up
The series of property cooling measures and the total debt servicing ratio (TDSR) framework introduced last June has reduced demand from local and foreign buyers, says Mok Sze Sze, head of auction at JLL.
“This has contributed to sellers’ difficulty in offloading their property at their desired price, resulting in some ending up as mortgagee sales,” she explains.
Consequently, mortgagee sales have crept up to 48 units in 3Q2014, with residential properties accounting for 80% of the sales, according to Colliers.
This is an increase from 42 properties in 2Q2014, and more than double the 22 mortgagee listings in 1Q2014.
So far, this year, 112 properties have been put up for mortgagee sale, which is treble the 32 for the whole of last year, says Ng.
However, Ng points out that the latest number is still only a quarter of the 452 mortgagee listings seen at the start of the Asian financial crisis in 1998.
“Currently, interest rate is still low, unemployment rate is still low while liquidity is high,” she adds.
“During the Asian financial crisis, interest rate was high, unemployment rate was high, and more people had problems meeting their financial commitments.” Compared to earlier years, 2014 is also notable for the number of mortgagee sales in high-end condos in prime districts 1 and 4, such as Marina Bay Residences, The Sail @ Marina Bay, Reflections at Keppel Bay and Turquoise in Sentosa Cove, says Colliers’ Ng.
At The Sail, a 592 sq ft, one-bedroom unit on the 47th floor of one of the twin towers was put up for auction twice.
A mortgagee sale, it was sold in a private treaty deal for $1.2 million ($2,027) on Sept 30.
Reflections at Keppel Bay has a 1,561 sq ft unit that is up for mortgagee sale.
It will be put up for auction by Knight Frank on Oct 21.
The unit has an indicative price of $3.1 million ($1,981 psf).
In the traditional prime districts of 9 and 10, some of the units that have been put up for mortgagee sales are in condos completed just two to three years ago.
For example, at The Verv @ RV located along River Valley Road, a 1,130 sq ft, two-bedroom unit will be put up for auction by JLL on Oct 30.
A mortgagee sale, the two-bedroom unit has an indicative price of $2.6 million to $2.7 million, which translates into $2,301 to $2,389 psf.
This is in line with the last transaction in the project in December 2012, when a similar sized unit on the 14th floor was sold for $2.65 million.
The Verv @ RV contains just 26 units in a single 16-storey tower, and was developed by niche property developer Heritage Group.
The project was completed in 2011.
In prime district 9, a penthouse at Residences @ Killiney has been put up for mortgagee sale.
The 5,059 sq ft unit includes a roof terrace of some 2,260 sq ft, and has an indicative price of $7.1 million ($1,403 psf).
This is below the original owner’s purchase price of $7.84 million ($1,550 psf) in 2010.
The 68-unit freehold Residences @ Killiney was developed by Hoi Hup Realty, and completed in 2012.
‘Stuck’
Stringent loan curbs as a result of the TDSR have made it more difficult for local homebuyers to secure loans, particularly for properties with higher price tags.
According to Redbrick’s Huang, while there are property investors who want to purchase, “they are stuck because of the current TDSR loan framework”.
The falling yields as a result of the softer rental market have also deterred investment property purchases.
For example, at the 95-unit freehold The Grange, located at the corner of Grange Garden and Grange Road, a four-bedroom unit was recently rented out at $9,500 a month.
In the past, four-bedroom units in the condo completed in 2008 could fetch rents of $12,000 to $13,000 a month, says JTResi’s Tan.
Buying interest from foreigners who traditionally formed a significant demand base for such highend properties has dropped since the imposition of additional buyer’s stamp duty (ABSD), adds Colliers’ Ng.
This is because buyers have to pay a hefty total buyer’s stamp duty of 18% for their property acquisitions, and that can amount to $1 million to $2 million for luxury properties with price tags of $6 million to $12 million, she estimates.
Prospective homebuyers are also holding back in anticipation of the surge in completion of residential units in 2015 and 2016, notes Ivan Looi, property analyst at DMG & Partners Securities in his Singapore real estate report on Oct 15.
Some developers are also delaying their launches, with an eye on the government stepping in to reverse some of its anti-speculation measures.
DMG projects new home sales to hit 8,500 to 9,500 units, and average selling prices to drop by about 6% to 10% this year.
Mortgagee sales are also surfacing in the prime eastern suburbs of District 15 and these involve mainly larger units.
For instance, a penthouse at Taipan Jade will be put up for mortgagee sale by JLL on Oct 30.
A boutique freehold residential block with just 12 apartments, Taipan Jade was developed by niche developer Novelty Group and completed in 2005.
The two-level penthouse, which has three bedrooms and a floor area of 3,175 sq ft, has an indicative price of $2.1 million ($661 psf).
The price is in line with the recent transaction price of a 2,659 sq ft unit on the fourth floor that was sold for $1.68 million ($632 psf) in August.
Along Amber Road, a 2,217 sq ft, four-bedroom apartment at Amber Residences that was put up for mortgagee sale was sold prior to DTZ’s auction on Sept 23.
The price was $2.6 million ($1,173 psf), according to a caveat lodged that day.
Amber Residences is a 114-unit freehold project developed by Voda Land and completed in 2011.
The buyer of the unit is said to be a Singaporean, and the recent price is some $282,100 below the original buyer’s purchase price of $2.88 million ($1,300 psf) three years ago.
JLL’s upcoming auction will also feature the mortgagee sale of a four-bedroom unit at Flamingo Valley.
The indicative price of the 1,593 sq ft unit is $2.1 million to $2.2 million, which translates to $1,318 psf to $1,381 psf.
This is the first time that a unit in the newly completed condo has been put up for sale.
The developer, Frasers Centrepoint, sold three units last month.
They were all one-bedroom units of 517 sq ft each on various floors, with prices from $819,532 to $915,800, or a median price of $1,596 psf.
As at end-September, there are only eight unsold units at the freehold 393-unit condo project on Siglap Road.
A 3,175 sq ft penthouse at Taipan Jade will be put up for auction on Oct 30 by JLL with an asking price of $2.1 million
‘Shoeboxes’ and HDB
Joy Tan, head of auction at DTZ, is seeing a wave of shoebox apartments appearing as mortgagee sales in private treaty and auction lists.
These are usually in newly completed projects, she notes.
She expects the number of mortgagee sales for such units to increase, as more of such projects with compact apartments are completing toward the year-end and in 2015.
“Some buyers who purchased shoebox apartments a few years ago with the expectation that they can rent them out at $3,000 to $4,000 a month, are finding that they can’t achieve those rents now that the units are completed,” she adds.
For instance, a 388 sq ft unit at EiS Residences on Haig Road will be put up for auction by Knight Frank later this month.
A mortgagee sale, the unit has an indicative price of about $600,000 ($1,546 psf).
The previous owner had purchased the unit for $569,000 ($1,468 psf) three years ago.
The freehold EiS Residences by boutique developer EastShinee Development contains just 16 units and is said to be newly completed.
Another unit, also a mortgagee sale, but only available for sale by private treaty, is a one-bedroom unit at Casa Aerata in Geylang.
The 420 sq ft unit at Lorong 26 has an indicative price of $600,000 ($1,429 psf).
Casa Aerata is a 78-unit apartment development that was completed in 2012.
The most recent transaction was for a fourth floor unit of 431 sq ft that changed hands for $620,000 ($1,440 psf) in April.
Asking rents for units of this size is $2,300 per month, according to listings on propertyguru.com.sg.
If achieved, gross rental yield will be around 4.5%.
In Woodlands, a 431 sq ft, one-bedroom unit at Parc Rosewood will be put up for auction by DTZ on Oct 20.
The unit was put under the hammer last month with an opening price of $600,000 ($1,392 psf).
The 99- year leasehold condo has 689 units and was completed earlier this year.
The developer is Kensington Land, a joint venture between Fragrance Group and World Class Land.
“The expectation is that there will be more ‘mickey mouse units’ [micro apartments] in the 300 to 500 sq ft size that will be put up for mortgagee sale next year,” says DTZ’s Tan.
More HDB flats are also likely to emerge as mortgagee sales.
Most of the HDB flats that are mortgagee sales tend to be larger five-bedroom flats or executive apartments in the northern region, such as Sembawang, Woodlands and Yishun, according to auctioneers.
An example is a 1,485 sq ft executive apartment at Woodlands Drive 50.
The unit has an indicative price of $550,000, although valuation is closer to $570,000, says Sharon Lee, head of auction at Knight Frank.
“This unit is seeing quite a bit of interest as it’s near the MRT station, and there’s some excitement about the Thomson East Coast Line and its link from Woodlands station to Malaysia.” Even though these are mortgagee sales, the HDB flats are not put up for auction as the ultimate lessor is HDB, explains DTZ’s Tan.
However, the trend is that there will be more mortgagee sales of HDB units next year.
According to DMG Research, the continued weakness in the HDB resale market will have a negative effect on wealth, further reducing upgrader demand for mass-market private homes.
On the other hand, drastic price declines of more than 20% per annum “appear unlikely as the government holds the wildcard to reverse some of its cooling measures, should prices take a turn for the worst,” notes analyst Looi.
More residential mortgagee sales are expected in the upcoming auctions as borrowers continue to face difficulty in selling their properties on their own, says Colliers’ Ng.
According to Lee Lak Kheng, DTZ’s regional head of research, capital values are unlikely to plateau soon as the property cooling measures and tighter financing conditions will keep transaction activity low.
“Increasing inventory from unsold units in projects that have been launched or are in the pipeline for launch, will sustain a buyers’ market for the months ahead,” she says.
This article appeared in the City & Country of Issue 648 (Oct 20) of The Edge Singapore.
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