Category Archives: Sentosa Property

Luxury homes face nearly $3m in losses in mortgagee sale

TWO luxury homes in Singapore are on the market at prices that would mean losses of nearly $3 million each as the local property market continues to weaken.

The mortgagee sale of the two units in Turquoise, a luxury Sentosa Cove condominium, at fire-sale prices comes amid signs that banks are forcing more cash-strapped owners to offload property to meet loan shortfalls.

The units, understood to belong to one owner, are on sale for about $1,600 per sq ft (psf) – an asking price of $4.5 million to $4.6 million apiece, which would mean losses of about $2.7 million each for the 2,777 sq ft units.

Caveats lodged with the Urban Redevelopment Authority showed that both apartments were bought in November 2007 at about $2,600 psf. Current market prices are $2,000 psf to $2,200 psf.

But the losses are still less than those suffered from the sale of two other 2,777 sq ft apartments in the project earlier.

These two apartments in the 91-unit project went under the hammer as distressed sales in July, and were sold for about $1,400 psf. At least one of the units was sold by DBS Bank, sources said.

The units had been bought in 2009 for about $2,550 psf but ended up suffering losses of up to $3.2 million.

Homes are put up for mortgagee sales when financial institutions try to recover their losses after a borrower defaults on a loan.

Experts say luxury homes are more likely to face forced sales, given the large sums involved and the fact that speculators may be involved.

Fewer suburban units are facing mortgagee sales, Colliers deputy managing director Grace Ng said last week.

The lower total price means the owners can pay their mortgage more easily and find buyers if they default, she added.

Mr Tan Tee Khoon, executive director of residential services at Knight Frank Singapore, said defaulting borrowers could have had difficulties selling their properties in the tepid secondary market, while an increased supply of new units in the prime districts means that it is harder to find a tenant.

“Sentosa’s exclusive location makes it less accessible than homes on the main island and harder to lease now,” he said.

“Also, borrowers who default are more likely to have been speculators.”

The property market has been buckling under the weight of cooling measures, with the luxury segment bearing the brunt of the slowdown on the back of dwindling demand and borrowing restrictions.

A total of 98 homes were put up for auction by mortgagees in the first 10 months of the year – far more than the 14 homes in the same period last year.

Housing loans for the third quarter came under close scrutiny as the three local banks released their financial scorecards last month.

DBS chief executive Piyush Gupta said the bank was not seeing any stress in its mortgage loan book. But United Overseas Bank and OCBC Bank posted higher non-performing loans from bad mortgages, attributing the rise to borrowers who bought luxury homes.

UOB disclosed only that the rise in bad home loans was mostly the result of mortgages at one luxury condominium, but Maybank Kim Eng analysts Ng Wee Siang and Ng Li Hiang noted in a report that it was “largely from one key project in Sentosa”.

Meanwhile, two units were put up for mortgagee sale at a Colliers auction last Friday. The three-bedders at The Laurels in Cairnhill had opening prices of $4.1 million and $3.6 million but were not sold.

The Straits Times understands that the units were put up for sale by UOB.

Sentosa condos, bungalows feeling the blues

Prices of bungalows and high-end condominiums in Sentosa have fallen significantly due to the series of cooling measures by the government, according to media reports.

But the most debilitating factors are the Seller’s Stamp Duty (SSD), tax of up to 18 percent for foreign property buyers and the Total Debt Servicing Ratio (TDSR) framework.

Under the SSD rules, all sellers are required to pay 16 percent of a property’s value if they sell it within a year of its purchase. Foreigners also need to pay a buyer’s stamp of 15 percent in addition of basic buyer’s stamp duty of around three percent, while the TDSR limits the loan quantum purchasers can get to 60 percent of their monthly income.

As a result, current prices of luxury condos at Sentosa are hovering near their record-low since end-2006 based on 15 deals, said Maybank Kim Eng.

Residential properties bought after 2006 and sold off in the past 12 months posted price drops of between five percent and 21 percent estimated its Singapore-based analyst Ng Wee Siang.

But the values of some repossessed condos auctioned off by banks in early-2014, such as two units at the Turquoise, dived by as much as 45 percent compared to their purchase price in 2007.

Chestertons’ Managing Director Donald Han noted the most affected segment consists of high-end homes bigger than 2,000 sq ft and costing from $4 million to $5 million

In fact, URA data showed an 11,280 sq ft bungalow at Treasure Island in Sentosa Cove lost over 50 percent of its peak-value when it changed hands this year, while a 7,341 sq ft property was sold for 39 percent less than the record-high of $3,214 psf.