Feb 22, 2009


Keen to cash in on mortgagee sales?

Expect to wait as banks are more likely to restructure loans than force-sell homes

By Joyce Teo, Property Correspondent

The guide price for this Sentosa Cove bungalow, which comes with a swimming pool, is between $12 million and $13 million. It is one of the popular projects up for auction this week. -- PHOTO: DTZ

More people are showing a keen interest in monitoring auction sales of properties in order to bag a distressed sale.

But the mortgagee sales that many are waiting for have yet to surface in any significant manner, property consultants said.

A mortgagee sale takes place when a bank force-sells a property at an auction after foreclosing on a mortgage. But auctions are also conducted for sales made by owners.

Last year, only $83.67 million worth of properties were sold through auctions - most of them were owners' sales, down from $407.43 million the year before. It marked the lowest point for the auction market in more than a decade.

Things could improve slightly this year. Consultants have said they expect to see a rise in loan defaults and forced or mortgagee sales this year.

Right now, they said the banks are restructuring the loans of potential defaulters, who may be offered interest-free holidays or allowed to stretch the loan period.

DTZ's senior director for investment advisory services and auction, Mr Shaun Poh, said that based on general feedback from banks and past experience, he expects to see more mortgagee sales surface in five to six months' time.

Indeed, the market could see a pickup in mortgagee sales in four to six months' time, said Knight Frank's executive director, Ms Mary Sai.

But contrary to expectations, there may not necessarily be a lot more of these sales because banks are open to working out a deal with their customers, she said.

Banks are unlikely to want to take back too many properties when they may not recoup their losses, consultants said.

Nevertheless, many potential buyers are already getting ready. 'We have been getting five to six requests a day from people asking to be put on our auction mailing list,' said Mr Poh.

For most of last year until October, his firm received just one to two requests a month.

It is the same at Colliers International. 'The demand is very strong. We can get up to 20, 30 people calling us on some days this year, compared with one to two calls a day last year,' said its deputy managing director and auctioneer, Ms Grace Ng.

'They want to be on the mailing list. They are just waiting for the market to bottom out.'

Ms Sai said potential buyers are 'coming in floods', asking to be on her company's list or calling about properties on offer.

'But it is very difficult for us to strike a deal because the buyers are putting in very low offers. They want to go only for a killing,' she said.

Ms Ng said her company has also yet to see fire-sale prices. Most properties on offer are sales by owners, not banks.

Nevertheless, if the owners are putting their properties up for sale in these times, they are obviously serious about selling, consultants said. 'They know the market and are willing to consider reasonable offers reflective of the current market,' said Ms Sai.

While there may not be a lot of mortgagee sales yet, some popular projects have surfaced recently.

For instance, a posh bungalow in 99-year leasehold Sentosa Cove and a swish St Regis Residences apartment in Tanglin Road are among the properties included in DTZ's auction on Thursday.

The guide price for the Sentosa Cove bungalow, which comes with a swimming pool, is between $12 million and $13 million, which works out to $1,449 per sq ft (psf) to $1,570 psf.

While the absolute sum is high, this is lower than the $17 million that another owner of a similar- sized house had asked for last month, and which had failed to attract any buyers.

The 3,757 sq ft unit at the 999-year leasehold St Regis has an indicative price of $2,400 psf, or about $9 million. Some units at this condo had previously sold for more than $3,000 psf.

At Jones Lang LaSalle's auction on Friday, there is an uncompleted condo for sale - a four-bedder at The Regency at Tiong Bahru.

Among the mortgagee sales this week is a one-bedder at uncompleted condo The Clift in McCallum Street at DTZ's auction, and a freehold Regency Park unit in district 9 and a Costa Rhu ground-floor apartment at Knight Frank's Tuesday auction.

Indicative prices are $1,500 psf for the 506 sq ft unit at The Clift and between $1.5 million and $1.6 million for the 1,722 sq ft Costa Rhu unit in Tanjong Rhu. Knight Frank withdrew the latter from its auction last month as there were no takers at $1.55 million.

The indicative price for the 2,260 sq ft Regency Park unit in Nathan Road is $1,000 psf to $1,200 psf, said Ms Sai. It comes with a $9,500-a-month tenancy which will expire in January next year. A bigger 3,175 sq ft unit was sold at $1,036 psf last month.

'Compared with last year, there are more attractively priced properties put up for auction this year,' said Mr Poh.

As he said earlier, there could be more mortgagee sales five to six months down the road.

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