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Sellers are warming to the idea of nailing potentially higher prices amid bidding war

MENTION an auction to home owners a few years ago and most would conjure up a down-at-heel image of desperate mortgagees offloading their homes at fire-sale prices.

But like an HDB upgrade, the image has undergone an extreme makeover, with owners now seeing auctions as a fast and potentially more profitable way to sell their properties.

The number of residential properties going under the auctioneer’s hammer has surged over the years as Singaporeans warm to the idea of nailing potentially higher prices amid a bidding war.

Colliers International noted recently that 172 homes were auctioned off by owners last year compared with 156 in 2004. But the figures can be misleading as the actual sales do not reflect the trend towards auctions because many transactions are done after the hammer falls.

Auctioneers said interested buyers at the bidding may approach the owners privately to negotiate prices and conditions of the sale, despite the fact that a winning bid was not made during the auction. So while only eight homes were sold by auction last year for $7.81 million compared with 13 homes for $10.81 million, the year before, the actual sales were higher.

‘We are definitely seeing increased sales of properties sold by owners, but most are transacted after the auction,’ said Ms Grace Ng, Colliers auctioneer and executive director.

She said more owners see auctions as a quick and transparent way to catch the eye of a larger pool of potential buyers.

One such owner, who wanted to be known only as Mr Yong, said: ‘Your property gets more exposure when auctioned off by a large corporation that has a bigger contact base compared to individual agents.’

‘It is also more transparent, as you can see the bids,’ added Mr Yong, a businessman who auctioned a 18,000 sq ft bungalow near Coronation Road for more than $7 million last year.

More owners now recognise that the publicity generated by auction houses can help them score higher prices that make up for the additional costs.

It costs between $600 and $800 to auction a property. This covers advertisements, photographs, printing of the property’s particulars and rental of the auction room. This is in addition to auction charges of 1 per cent of the sale price, similar to what property agents charge. However, the auction fee may be waived for larger properties, said Ms Ng of Colliers. A goods and services tax charge of 5 per cent is also levied.

The headline-grabbing prices fetched by some homes, such as the $12.55 million bid for 49A Binjai Park, owned by former Citiraya boss Ng Teck Lee, have also shown how auctions can draw crowds of suitable buyers.

The attendance at auctions has been quite consistent, but recently, more people have been quicker to put up bids, said Mr Lee Tang Keat, Jones Lang LaSalle associate director and head of auctions and sales.

If a property fails to sell at the auction, usually because bids are below the reserve price, they are then put up for private treaty sale before being entered for a repeat auction.

Source : Sunday Times - 2 Apr 2006