Tag Archives: Turquoise

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.

UOB’s non-performing housing loans hit 10-year high

UOB’s non-performing housing loans soared to 34.2 percent in Q2 2014, or its highest level since Q4 2004, reported the media.

The sharp spike surprised Maybank Kim Eng given the perception that UOB is one of Singapore’s more conservative home lenders, with only a slight year-to-date correction in Singapore’s house prices.

“We understand its NPLs were isolated to a group of borrowers who had invested in Turquoise, a high-end condominium project in Sentosa,” said Maybank in a report.

URA data showed that two units there changed hands in Q2 2014 at 45 percent discount to their launch prices.

The report noted that the transactions “stoked fears that it is a matter of time before default cases become widespread, undermining Singapore banks’ profitability that has been propped up by low charge-off rates.”

To ascertain sentiment on the Sentosa micromarket, Maybank examined recent transactions of non-landed properties there.

It found that there are nine condominium projects in Sentosa. The first four, launched during the nascent recovery of Singapore’s property market in 2004 to 2005, had an average selling price of below $1,600 psf, while the remaining five, which were launched later, were priced above $2,600 psf.

“In our view, the large losses at Turquoise can be partially explained by the project’s higher launch price,” said Maybank.

Notably, Turquoise’s launch price of $2,605 psf is about 75 percent higher than the average price at The Oceanfront ($1,360 psf) and The Coast ($1,592).

“These two were launched one year ahead of Turquoise. This could mean that higher-priced projects at Sentosa are at greater risk of a price correction,” said the report.