Source : The Sunday Times, Dec 30, 2007
Record 810 sales closed this year as transparency of process, immediacy of deals attracts buyers
ONE of the more striking consequences of the booming real estate market has been the sharp increase in the amount of property - residential and commercial - going under the hammer.
Auctions, which used to be associated mainly with forced sales of repossessed properties, got the thumbs-up from owners this year.
A record 810 properties were auctioned this year - 210 more than last year - while the value of sales shot from $129.54 million to $264.7 million.
‘The rising market earlier this year actually encouraged more buyers to buy at auctions because it is a transparent process and a confirmed buy,’ said Ms Mok Sze Sze, the head of auctions at Jones Lang LaSalle.
While some buyers can be intimidated by auctions - where they face a room full of potential rivals - they can yield results.
Mr Teo Jing Kok, the Singapore Land Authority’s (SLA’s) deputy director of sales, said: ‘Unlike a tender, the auction process gives individuals who may not be familiar with the real estate market the time and opportunity to adjust their bids.
‘In a tender, an amateur will have only one chance to get his bid correct and it favours those who are more experienced, for example, land developers.’
The SLA held a first-of-its-kind auction of six small residential plots aimed at individuals keen on developing their own landed homes. All six were sold at the auction last month.
The bulk of auction sales this year - 45 per cent - were in the residential sector and included good-class bungalows. Private retail units made up 21 per cent while HDB shops accounted for 17 per cent of the total.
Shophouses, while forming only 5 per cent of auction sales, reflect one of the most significant trends in real estate this year - soaring office rents.
Because rents have escalated due to tight supply, some firms have opted to buy shophouses via an auction in a bid to avoid paying exorbitant rates in prime areas, said Knight Frank’s executive director (auctions), Ms Mary Sai.
A wider variety of homes was put up for auction this year, including penthouses and high-end condominiums such as The Berth by the Cove, Marina Bay Residences and Paterson Residence. However, many failed to sell, with buyers discouraged by the price levels, said Ms Sai.
Auctions can yield bargains for canny bidders. A three-bedroom walk-up apartment in Joo Chiat Place went for $490,000 earlier this month - about $40,000 above the opening bid - but around $10,000 or more less than what such properties usually fetch, said Ms Sai.
But a 2,465 sq ft unit at Watten Estate Condominium sold for $2.4 million in an April auction, compared with the $1.73 million price tag for a similar-sized unit in the estate late last year.
There were a few bidders who were probably betting on the estate’s en-bloc potential and thus drove prices up, added Ms Sai.
Owners taking the auction plunge typically pay a charge of 1 per cent as well as the 7 per cent goods and services tax. There is also an administrative fee that can range from $500 to $1,000 to cover advertisements, printing of the property’s particulars, auction room rental and other costs.
A key benefit owners enjoy from auctions is that ‘they get their money straightaway and there is no need for any negotiation, even on sale terms’, said Ms Sai. But if the real estate sector is quiet, buyers might be thin on the ground and bids may struggle to rise above the reserve.
The cooler market over the past two months has seen few sales done at auctions but more are expected next year, especially from the mass market segment, consultants said.
Those keen to buy at auctions should arrange for a viewing beforehand and ensure they can slap down an upfront payment of 10 per cent of the sale price if their bid succeeds.
The first auction of the new year will be on Jan 10 when Knight Frank will auction off residential properties and a strip of land behind a row of houses in Balestier.
Colliers International will hold one on Jan 16, followed by DTZ on Jan 17 and Jones Lang LaSalle on Jan 29.
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