Luxury homes hit auction floors as sale, rental prospects wane _Today 11.07.2016

SINGAPORE — The auction floors in the Republic were busier last quarter with auctioneers sealing deals valued at nearly three times that the previous quarter, as more luxury home owners faced difficulties servicing their loans amid heightened economic uncertainties and turbulent financial markets.

Between April and June, seven properties — six of which were residential — worth a combined S$14.81 million, went under the hammer, figures by real estate consultancy JLL showed.

This is a 152 per cent jump from the S$5.88 million recorded in the first quarter, when six properties — with only one being residential — were auctioned.

It is also double the S$6.8 million reported in the second quarter of last year.

JLL noted that the rise in sales value was pumped up by three big-ticket transactions that went for between S$2.92 million and S$3.9 million. This is above the “usual sweet spot” of S$1 million to S$1.5 million price tag that potential buyers typically settle for in the current climate. However, the three deals were reached at a price way below what the previous owners had paid.

“All three units were being offered for sale for the first time and were sold within weeks of entering the market … We observe that buyers are still on the lookout for a good deal in the residential sector and are ready to take action when the opportunity presents itself,” said Ms Mok Sze Sze, head of auctions at JLL.

One of the three, a condominium unit in Sentosa Cove’s Turquoise was auctioned off at S$2.92 million —almost half the S$5.46 million that the previous owner paid in 2007.

Among the other two, a unit at Silversea in Marine Parade was sold at S$3.9 million, lower than the last caveated price of S$4.78 million in 2012, while a One Amber unit within the East Coast vicinity went to a buyer for S$3.7 million versus the purchase price of S$4.4 million back in 2011.

These homes were put up for mortgagee sales by banks after their previous owners defaulted on their housing loans. Such sales have dominated the auction floors in recent months as home owners face pressures from the prolonged economic uncertainties, lacklustre property market, slowdown in China’s growth, stock market turbulence and turmoil in the oil and gas industry.

These factors especially affected owners of luxury homes or units of large sizes such as penthouses, as both sale and rental prospects have waned amid the continued enforcement of property cooling measures and loan curbs.

Real estate consultancy Colliers International noted that in the first half of this year, 32 out of 69 non-landed residential properties put up for mortgagee listings in the first half of this year were large units with floor areas above 1,500sqf.

Thirteen of the 32 are located in prime residential districts of 9, 10 and 11, where foreigners traditionally form a significant demand base.

Examples of such properties that went under the hammer included units at The Sail @ Marina Bay, OUE Twin Peaks at Leonie Hill and Paterson Suites on Paterson Road.

Ms Grace Ng, head of auction and sales of Colliers International, said: “Owners of such large (units), which come with a bigger price tag, are facing challenges selling their properties in an environment of abundant supply and subdued foreign and local buying interest amidst stringent loan curbs.

Some investors who have bought penthouses off plan also found it difficult to rent or sell their properties upon completion.

This is due to the undesirable layout or space wastage arising from the large terraces or voids.”

She added: “Property owners are finding it increasingly difficult to secure a tenant and, or achieve their desired rents to service their monthly mortgages. Owners who are holding multiple properties, are at greater risk of loan default.”

Flash estimates by the Urban Redevelopment Authority (URA) last week showed private home prices in the Republic fell for an 11th consecutive quarter to log the longest losing streak on record in the April-to-June period, taking the cumulative decline since the peak in 2013 to 9.4 per cent.

The almost three-year-long decline comes after prices surged more than 60 per cent after the global financial crisis in 2009, prompting the Government to implement repeated rounds of cooling measures and loan restrictions.

Amid calls from developers and agents for the measures to be lifted, the Government has repeatedly signalled its reluctance to do so, with Minister for National Development Lawrence Wong saying in April that it is “too early to declare victory”.

“There aren’t that many tenants to go around so it’s a tough market for owners looking to lease out their units … especially in the CCR (Core Central Region), “ said an agent who asked to be known as Alvin. “Expats have also had their housing budgets cut, so for owners, you either settle for lower rental income or risk having to give up your property when times get tough.”

URA’s final real estate statistics for the second quarter are due for release within the next two weeks, but market watchers said rentals is almost certainly going to fall again. This means continued weakness in the luxury residential property market.

“The price weakness is still there and will continue, especially in the CCR, where we’ve seen significant discounting taken by sellersto move sales and higher number of mortgagee sales,” said Mr Ku Swee Yong, CEO of Century 21 Singapore.

But for those hunting for bargains in the property market, whether it is the dream luxury apartment or a commercial lot, the auction floors would be the place to watch as the current economic uncertainties.

“Owners are now more open to putting their properties under the hammer … In the second half of the year, we expect to see more mortgagee sales coming on stream, including non-residential properties, as businesses feel the pressure of an uncertain global economic outlook,” said JLL’s Ms Mok.