Owners turning to auction sales

Source : Sunday Times – 27 Dec 2009

Next year, there will be even fewer mortgagee sales at auctions as the economy continues to improve. Yet more owners are expected to go the auction route when it comes to selling their properties.

Jones Lang LaSalle said it expects to see more owners choosing to do so in the year ahead.
It also believes the number of mortgagee sales – or forced sales of repossessed properties – will fall further as the economy continues to improve.

Colliers International noted that more owners have taken to using auctions as a mode of sale due to its convenience.

This method has a relatively structured marketing process, a fixed sale date as well as a pre-arranged viewing schedule, it said.

‘Additionally, owners would be able to achieve good prices as a result of competitive bidding at auctions, especially if the market is buoyant.’

The bet is on a stronger property market next year. This means that mortgagee sales may not be done at very low prices.

‘A mortgagee sale does not necessarily mean a cheap sale,’ said Knight Frank auctioneer Mary Sai.

‘Next year’s mortgagee sales will be done at the prevailing market rate then, and prices may have inched up a few more per cent from this year’s level,’ she said.

Colliers expects high-end prices to recover next year as Singapore steps out of the global recession and opens its two integrated resorts. The sale of more high-value properties will prop up the total sale value at auctions next year, it said.

Mass market prices have recovered, while high-end prices are still a distance from the boom levels of early last year.

Nevertheless, buyers may still be able to find what they want at an auction.

As apartments get smaller and smaller these days, Colliers International is predicting that large homes will increase in popularity at next year’s auctions.

Residential properties that are perceived to be ‘value for money’, such as landed homes with big land areas or large apartments, would continue to be favoured by buyers, said its deputy managing director (agency and business services) and auctioneer Grace Ng.

But these need to be at bargain prices as terrace houses or small bungalow plots are typically popular with owner-occupiers.

The commercial sector, experts said, may present some good buys.

Colliers said that given ample liquidity in the market, shops and shophouse units with attractive rental returns will remain highly sought after.

Said Ms Sai: ‘Strata shops and offices are something to look out for. If rentals have declined, prices will likely fall in tandem.’

In the past, buyers wanted a gross rental yield of 6per cent to 8 per cent for a commercial property, she said.

‘Now that the cost of borrowing has fallen, some short-term buyers may want to buy a commercial property that gives a smaller yield of 4per cent to 5 per cent,’ she added.
Indeed, said Ms Ng, tenanted shop and shophouse units with average yields of about 5 per cent have attracted investors at auctions this year, given that bank interest rates are at a low of less than 1per cent.

In comparison, the average residential yield is about 3per cent to 3.5 per cent.

Landed homes typically offer an even lower yield of 1.5per cent to 2 per cent, though the potential for capital appreciation may be greater, experts said.