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Mortgagee auctions expected to rise

Banker says a key reason is that foreigners are defaulting on loans for high-end investment properties
Tuesday, January 12, 2016 - 05:50
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Among the real estate going under the hammer this month is an uncompleted factory building along Kranji Link (above) comprising a part-single and a part-four- storey warehouse, a block of four-storey ancillary offices and a four-storey workers' dormitory for between S$3.5 million and S$4 million. A receiver sale of a freehold detached house at 45 Woo Mon Chew Road, with seven bedrooms, has a guide price of S$9.5 million.
BT_20160112_KRAUCTION12B_2061504.jpg
Among the real estate going under the hammer this month is an uncompleted factory building along Kranji Link comprising a part-single and a part-four- storey warehouse, a block of four-storey ancillary offices and a four-storey workers' dormitory for between S$3.5 million and S$4 million. A receiver sale of a freehold detached house at 45 Woo Mon Chew Road (above), with seven bedrooms, has a guide price of S$9.5 million.

Singapore

AMONG the properties making their auction appearance this month are an uncompleted factory in Kranji on a site with a balance lease term of about nine years, a couple of shop units in the basement of the freehold Ming Arcade along Cusacaden Road (both mortgagee sales) and a receiver sale of a two-storey detached house off Upper East Coast Road with seven bedrooms and an indicative price of S$9.5 million.

A banker told The Business Times that mortagee listings at auctions can be expected to increase further this year. "From our experience, a key factor for growth of such listings is foreigners defaulting on loans for their purchase of high-end investment properties. Typically these borrowers do not live in Singapore."

Knight Frank's auction on Wednesday will see eight new listings.

These include the uncompleted factory building along Kranji Link comprising a part-single and a part-four-storey warehouse, a block of four-storey ancillary offices and a four-storey workers' dormitory. The property is being offered on an "as-is-where-is" basis. The indicative price is S$3.5 million to S$4 million.

As the factory is being built on a site leased from Jurong Town Coporation, a sale will be subject to JTC's approval of the assignment of the lease.

The 107,640 sq ft site is zoned for Business 2 use and has a 2.5 plot ratio (ratio of maximum gross floor area to land area).

The property is owned by mainboard-listed Swee Hong Limited, which is involved in civil engineering and micro-tunnelling works. The company has entered an arrangement with its creditors.

Based on regulatory filings made by the company, United Overseas Bank, as mortgagee of the company, had earlier tried to find a buyer for the Kranji Link property, granting an option for the sale of the property to a buyer. However, JTC rejected UOB's application for the assignment of the lease to the buyer, resulting in the deal being cancelled.

Swee Hong told SGX in December last year that it understood that JTC had in a letter to UOB dated Dec 4, 2015, informed the bank that JTC had evaluated the application based on the potential buyer's proposed business plan and financial projections and that after due consideration, was unable to approve the application of the assignment of the lease.

At Ming Arcade, which was previously put up for collective sale but not sold, two adjoining units of 194 sq ft and 172 sq ft in the basement will also go under the hammer for the first time. The total indicative price for the two units combined is S$920,000 to S$960,000.

Knight Frank will also be auctioning a shop unit at Parklane Shopping Mall in Selegie Road. Also a mortgagee sale, the indicative price for the 258 sq ft second-floor unit is S$430,000-450,000. Parklane has a balance site lease of 57 years.

Another property at the same auction will be an owner's sale of a freehold four-bedroom apartment with a utility room on the second floor at The Sovereign in Meyer Road. The indicative price is S$4 million to S$4.2 million. It is being sold with tenancy.

Those keen on landed homes may want to check out an estate sale of a three-storey semi-detached house at Jalan Emas Urai in the Chestnut/Dairy Farm area. The 999-year leasehold house sits on 2,725 sq ft of land, spans three storeys and comes with an open roof terrace and a lift. The indicative price is S$3.6-S$3.8 million. The house has four bedrooms and a maid's room.

On Jan 27, Colliers International will be conducting an auction where four properties will make their debut. These include a receiver sale of a two-storey freehold detached house at 45 Woo Mon Chew Road in the Upper East Coast/Bedok South area. The house has seven bedrooms, a maid's room and study room. The property has a land area of 7,543 sq ft and its guide price is S$9.5 million.

Also set to go under the hammer at the same event is an owner sale of a two-storey corner terrace house at 19 Bedok Walk. Situated within walking distance of Tanah Merah MRT Station, the property sits on 3,664 sq ft of freehold land; it has four bedrooms and a maid's room. The price tag is S$3.45 million.

The same event will also feature a liquidator sale of an office unit on the 15th floor of High Street Centre; the guide price is S$1.35 million. There will also be a mortgagee sale of a two-bedder of 807 sq ft at The Interlace in Depot Road - with a S$1.2 million indicative pricing.

JLL's auction on Jan 28 too will feature two mortgagee sale apartments.

One will be a 1,130 sq ft two bedroom plus study unit on the seventh floor of the freehold Jardin along Dunearn Road; the guide price is S$1.8 million to S$1.9 million.

The other, a 1,259 sq ft unit on the fourth level of The Bayshore, is indicatively priced at S$1.15-1.2 million. It has three bedrooms and a maid's room. The Bayshore is on a site with a balance lease term of 76 years.

Mortgagee listings at property auctions hit a seven-year high of 241 in 2015, according to Colliers' data. Residential properties made up almost 80 per cent of the mortgagee listings.

The banker whom BT spoke to said that putting a property up for auction is a last-resort measure. "Typically when a borrower defaults - that is, he cannot meet the monthly loan instalments - we call the customer to try and restructure the loan, lengthening the repayment period.

"Alternatively, we may ask the borrower to try and sell their property on their own - because once the bank steps in, buyers will hope for a fire sale."

While the total number of properties put up for auction (including owner sales and factoring in re-listings) rose to a six-year high of 796 in 2015, only 33 were sold at auction - translating to a 4.1 per cent success rate.

Colliers deputy managing director Grace Ng said one reason for the low success rate is the continuing mismatch between sellers' and buyers' expectations.

"While banks are guided by valuations in setting their reserve price, buyers often expect a steeper discount in light of falling property prices, the mounting supply of private home completions, rising interest rates and the government's cooling measures," Ms Ng added.

Sharon Lee, head of auctions at Knight Frank, acknowledged that the sales rate at auctions may be low, but explained that many buyers prefer to pick up a property after auction, as they need to pay only 1 per cent of the purchase price as deposit - compared with 5 or 10 per cent for properties sold at auction. "Moreover, some buyers may ask for a slightly longer completion period for the sale when they buy post-auction."

All three auctions will begin at 2.30 pm at Amara Hotel on the scheduled days.