“Going once, going twice, sold!” This is a phrase commonly heard at property auctions in Singapore, which have – over the years – gained favour with both sellers and buyers.
Auction houses, such as Colliers International, DTZ, Jones Lang LaSalle and Knight Frank, typically conduct auctions on a monthly basis in a hotel. About 200 people on average show up at each session, comprising both local and foreign buyers.
The stigma of auctions associated with properties that have been repossessed by banks has slowly eroded over the years, as witnessed by the decreasing number of such properties surfacing at auctions versus the increasing number put up by property owners.
In 1H 2010, mortgagee sales accounted for a mere 14 per cent of the total number of properties being put up for auction. The rest were sales by owners. This is a stark contrast to the 50-50 split between mortagagee and owner sales seen in 1998.
The paradigm shift to using auctions as a mode of sale in Singapore has become more prevalent today, with both sellers and buyers acknowledging that the auction process is transparent and more efficient.
In fact, property auctions are also increasingly gaining favour with developers and foreign buyers.
During the property boom years in 2006 and 2007, developers – including Sentosa Cove and Tuan Sing Holdings – successfully sold their land parcels and new residential units to an international audience via auction sales.
Not only did these developers achieve record prices, they also gained great exposure for their projects and garnered high participation from foreign purchasers hailing from Australia, Hong Kong, India, Indonesia and Malaysia.
Property Auctions Increase The Probability Of Sale
The increasing trend of property owners opting for auctions as the mode of sale can be attributed to a number of reasons.
Typically, sellers have three sale opportunity windows: 1) Before the scheduled auction date, if the price meets the seller’s expectations; 2) On the auction day; and 3) After the auction date, through private treaty negotiations.
Before a scheduled auction, auction houses would market the properties to the contacts in their database. This is accompanied by an intensive two-to-three-week advertising campaign to reach out to prospective buyers. Hence, property owners can be assured that the reach to prospective buyers is maximised.
The fixed auction date will encourage genuine buyers to do their due diligence in researching the property and work out their financing without procrastination, so that they can reach a decision by the date of auction.
Competitive bidding at the auction also enables the seller to obtain the best price for his property.
If the bid price meets the minimum reserve price set by the seller, a confirmed sale then takes place on-site with the knockdown of the hammer, followed by a down-payment (usually five per cent of the sale price for residential properties) and the signing of the sale and purchase agreement.
Hence, the probability of a sale through auction is higher. Given the trend that more vendors are using auctions as a method to sell their properties, auctions will continue to gain popularity in Singapore.
Popular Property Types Seen at Auctions
Mass market apartments that are well located in established areas – including Bedok, Changi, Jurong, Serangoon, Telok Kurau and West Coast, among others – are generally very popular with upgraders.
Buyers are attracted to older properties in the secondary market due to their large floor area, compared to new developments which are much smaller in size.
Some properties successfully auctioned off in the first half of the year included apartments in Chiltern Park (Serangoon), Changi Green (Changi) and The Warren (Choa Chu Kang), which were sold at $1.015 million, $918,000 and $830,000, respectively.
Landed properties are in demand due to their limited supply in land-scarce Singapore. Houses located in the Bukit Timah vicinity, such as Watten Estate and Hillcrest, are the most sought after due to their proximity to reputable schools and the Circle Line. Four semi-detached houses at Hillcrest Road and two at Watten Estate were sold for between $3.32 million and $3.53 million each.
What Are Popular In 2010?
Properties with en bloc potential
With the collective sale market showing a recovery, older properties with en bloc potential are once again back on buyers’ radar.
Apartments in Windsor (Upper Thomson Road) and Greenlodge (Toh Tuck Road) were sold for between $1.08 million and $1.28 million earlier this year.
High-end properties are making a comeback, propelled by the return of foreign buyers and the opening of the two Integrated Resorts (IRs).
Five high-end apartments worth a total of $13.38 million were sold at auctions in the first half of the year. They included a unit at Oceanfront (Sentosa Cove), which was sold for $3.15 million.
The most expensive luxurious apartment sold by far this year was an apartment in D’Grove Villas, which was knocked down at $5.42 million.
High-end properties in developments that have the potential to be put up for en bloc sale, such as Claymore Plaza Apartment (Claymore Hill), D’Grove Villas (Orange Grove Road) and The Beaumont (Devonshire Road), were sold at auctions this year.
Popular Property Types To Watch For In The Near Future
Inner city apartments
Investors are turning their attention to apartments such as The Sail (Marina Bay), and Icon (Tanjong Pagar) – especially those in the region of $1 million to $1.5 million.
Their close proximity to the two new IRs and downtown area as well as ease of access to other parts of Singapore have made them highly rentable and they generate attractive yields.
New properties which are nearing completion or have obtained Temporary Occupation Permit (TOP)
Such properties appeal to both owner occupiers and investors due to their near-term rental generation ability, as well as near-term owner-occupation opportunity.
By Grace Ng, deputy managing director (Agency and Business Services) and Auctioneer at Colliers International.