New auction date, Putra Place price lowered

The auction price of Putra Place, which houses The Mall shopping complex, Legend Hotel and an office tower, has come down by a tenth to RM571.05 million

The auction price for Putra Place, located opposite the Putra World Trade Centre in Kuala Lumpur, has come down by a tenth to RM571.05 million as there have been no bids to date.

On Wednesday, the Kuala Lumpur High Court set June 28 as the new auction date.

Putra Place, which houses The Mall shopping complex, Legend Hotel and an office tower, failed for a second time to attract a buyer, resulting in the price cut.

Commerce International Merchant Bankers Bhd (CIMB) is selling Putra Place to recover loans given to property owner Metroplex Holdings Sdn Bhd.
When it first went up for auction in April 2008, the price was set at RM705 million.

In the absence of bids, the price was reduced by 10 per cent to RM634.5 million.

Another auction date was set for January 20 2009, but the auction did not take place as the judge felt that a wider net ought to be cast to attract more interest in a property of that size.

Apart from Malaysia, advertisements were to have been placed in Canada, Los Angeles in the US, Indonesia, Hong Kong, Taiwan, Japan and Singapore.

A new auction date was later fixed for August 20 2009, which also failed to attract any bidders.

The previous order on advertisement will apply in the up-coming auction.

The Mall comprises eight levels of podium retail/shopping units. The Putra Place office tower covers the tenth floor to the 33rd, while the 25-storey Legend Hotel includes serviced apartments and penthouses.

The freehold property with 193,621 sq ft space has 1,323 parking bays.

By Business Times

Brisk auctioning since downturn

Licensed auctioneer and auction firm Ng Chan Mau & Co Sdn Bhd general manager Foong Chon Wai’s schedule has been pretty tight since the beginning of the year and he is expecting to be even busier in the coming months.

“The number of properties up for auction has increased by 5% to 10% since September last year mainly due to foreclosures and we expect more to come as banks’ non-performing loans increase,” he says.

This could be the scenario going forward for the property auction business as the current economic downturn takes a toll on the ability of property owners to service their mortgages, resulting in more properties going under the hammer.

A sale by public auction is a way by which properties are put up for sale by their beneficial owners, usually a financial institution.

Prospective buyers for the properties will gather at the auction venue and put in their bids or offers for the properties that they are interested in.

The bidding will stop when the highest price is called out three times by the auctioneer when no further bids are made. The person who submits the highest bid will be declared the buyer for the property.

Foong, who has some 20 years’ experience in the auction business, expects to see an increase in lower-end properties (RM50,000 and below) coming up for auction in the coming months as the lower income group is the most affected by the economic downturn.

Leong Auctioneer Agency has also experienced an increase of 10% to 20% in the number of properties going for auction since October last year.

Owner and licensed auctioneer Leong Wye Hoong says more high-end condominiums, in the range of RM250,000, in the Kuala Lumpur city centre (KLCC) have been going under the hammer since the beginning of the year.

Many of the owners of the properties are expatriates who are looking to get rid of their properties while the prices are still high, he adds.

Condominiums in the KLCC vicinity are currently selling for RM1,200 to RM1,500 per sq ft versus RM700 to RM800 some three years ago.

“Prices for such properties have gone down by 10% to 20%. We have a handful of condominiums in the KLCC area up for auction next month and more may be coming up as borrowers default,” Leong cautions.

He foresees prices going down by as much as 30% for the condominiums, going forward, as supply currently exceeds demand and prices need to be low enough to attract bidders.

Nevertheless, Foong does not expect the price of certain properties such as landed residential properties, commercial properties such as shoplots and industrial properties, including factories and agricultural land, to come down as demand for such properties is still strong.

Properties which are not in demand in places such as Bukit Beruntung, Nilai, Rawang, Mantin and Bangi could see prices pushed down further, he notes.

“In the past two months, people have become more cautious when buying property. They do not simply buy properties anymore and will normally wait for the properties to hit below market price first.

“This year we expect properties which are not in demand, especially due to their locations, to go through two or three auctions before they start attracting bidders,” he says.

Properties going for first auction will have a reserve price that is the market value of the property but the price will decrease by about 10% in every subsequent auction if there are no takers.

“There are opportunities for buyers looking to pick up properties in an auction, especially in such bad times, as they may find a rare property which will not be auctioned in better times.

“Such properties will attract lots of bidders but if a buyer does not mind paying a bit more than the market price, he should be able to snap it up,” Foong says.

Leong concurs that not all auctioned properties would be priced below market value. “It all depends on the type of property and location. For example, a shoplot in SS2 Damansara could be snapped up at a higher price.”

Some auctions that Leong had handled recently even made quite a bit of profit for their owners – a shoplot in Bangsar generated a surplus of over RM300,000 from an auction while a piece of industrial land in Gombak made a surplus of over RM700,000.

Auctions have also become popular as people are more aware of the benefits of buying auctioned properties.

Foong believes that property buyers can get pretty good deals in terms of pricing via property auctions.

“Auctions also enable the transaction to be done in the open and in a very transparent manner,” he points out.

Leong says auctioneers are now more innovative in their marketing efforts to attract bidders to their auctions.

“We do not just put up notices in the surrounding areas of the properties but also distribute flyers, put up the property details on our website and even have roadshows to inform potential buyers of when and where a certain auction will take place,” he says.

A PUBLIC auction could be a way for property buyers to snap up properties at a bargain but the auctioneers’ advice is for buyers to do their homework first before buying an auctioned property.

Some of the factors to take note are:

Legal advice

Obtain a copy of the condition of sale and seek independent legal advice on it.

Property inspection

Prospective buyers should inspect the property they are interested in by looking at the external facade and location first. The property interior may not be available for viewing.

Vacant possession

It is not a requirement for auctioned properties to come with vacant possession.

Bank loans

Prospective buyers should consult banks on the loans available for the auctioned property to ensure that financing will not be a problem.

Title search

An official individual title search at the relevant Land Office or other relevant authorities should be conducted on the property to ensure that an individual/strata title has been issued and that there are no caveats attached.

Enquiries with developer

Make the necessary enquiries with the developer, proprietors and other relevant parties to confirm the terms and conditions of the sale such as whether the sale is open to all races or to Malaysian citizens who are bumiputras only.

By The Star

Homes shunned at auction

LONDON: The residential property market took a turn for the worse last week but the evidence is likely to be missed by most homeowners.

According to the Royal Institution of Chartered Surveyors (Rics), just 57% of the 7,669 homes that went up for auction in 4Q2007 were sold for the reserve price.

This figure was 12% down on the same quarter in 2006 and marked the lowest success rate at auction for three years. Most homeowners may feel safely detached from auction figures, but they have implications for the wider market. For a start, despite the dip in sales, the number of homes that went to residential auction was up 15% on the year before, says Rics. That was due to repossessions which, the Council of Mortgage Lenders (CML) reports, reached 27,100 in 2007 – up 20.9% on the previous year. Rics forecasts that repossessions could rise a further 50 % this year as a result of last year's rate hikes and the credit crunch.

But still more pessimistic commentators claim the new auction figures are proof that the wider market is destined for a crash. "The value of a property is not the latest monthly average but the price of the last one that was sold," says Jonathan Davis at website Houseprice-crash.co.uk. "If
they are not selling at the current reserve prices, sellers have no choice but to reduce these prices and put them back up for auction. This process brings the value of all property downwards – especially as many auction bidders are now not from the trade but novice investors holding out for a bargain. Auctions are the retail market."

And that's not where the impact of the Rics figures end. According to Allsop, the UK's biggest property auctioneer, around half of the typical 400 homes sold at any one auction have already been repossessed by lenders. With house values down and mortgage profits escaping through the back door, banks must recoup losses from somewhere and fears are mounting that this will be in the form of higher rates and stricter lending criteria. Ultimately, it may be the average homeowner – who has probably never been to an auction – who will be hit in the pocket when they try either to switch their mortgage deal or take out a new home loan when moving.

Oliver Gilmartin, economist at Rics, says: "While tighter credit conditions will be most acute for those with a poorer credit history, less generous loan amounts and the introduction of upper limits on some advances could equally hit the mid-tier of the market, which would increase the number of properties languishing on auction books." A spokeswoman for the CML denies the new auction figures will have an impact on lending conditions as only a "minority" of repossessed properties end up being sold at auction anyway. "Lenders have to get the best price for a property, which often means they are marketed and sold through estate agents."

But Gary Murphy, a partner at Allsop, says the overall market is "considerably weaker" than the auction one. "Repossessed homes are often offered by private treaty first but go to auction when the price cannot be achieved," he says.

Auctioneers also like to distinguish themselves from their rivals. "Sale success is a question of whether the auctioneer is giving the right advice to their clients about reserve prices," says Murphy, adding that Allsop sold 88% of its 415-lot catalogue in February and 84% in December.

Broker Savills has also reported healthy figures. In a residential auction last month, it sold 75% of stock, raising over £25 m (about RM163 million). Charles Smailes of the National Association of Valuers and Auctioneers adds that quarterly numbers are a snapshot of "times gone by" rather than an indication of the current market.

"The market was post-credit crunch and still reeling from the American sub-prime and Northern Rock debacles. Auctions are a very public and honest evaluation of what is going on at the time – and that's why I am sure that the 1Q2008 figures will be more optimistic." However, with both the Halifax and the Nationwide reporting that house prices fell yet again in February, people can't be too careful. "Homeowners will need to be vigilant about meeting payments for all sorts of utilities, cards and loans," warns Melanie Bien, director of Savills.

"They would also do well to pay down their mortgage and reduce the loan to value if they have any spare money. This will make it easier for them to remortgage when the time comes," adds Bien.

By The Independent

Auction caution

Buyer beware: Before buying a house at an auction, the buyer needs to be aware of the issues and complexities involved.

Looking at the advertisements in the daily newspapers, it would appear that a large number of properties are being auctioned off every weekend. The indicated prices appear to be way below the market price, making it appear like an attractive purchase.

Is it safe to buy a property at an auction, and is the buyer adequately protected by the law? Can properties be auctioned off without a court order?

Well, court approval is only required if there is a precondition in the loan agreement requiring approval of the court before it can be sold. Otherwise the court is only involved if the land has a charge registered under the National Land Code.

Right to sell
Almost all the auctions in the advertisements include a reference to a bank, a financial institution or a borrower. This would suggest a loan default scenario. The words “assignee” and “assignor” in the advertisements suggest that the property in question does not have separate individual titles to enable a charge to be registered.

Where there is no individual title and the loan is granted on the basis of a loan agreement and a Deed of Assignment, the lender is entitled to dispose of the property on the strength of a Power of Attorney, unless there is a restriction.

In fact, most such documents allow the lender to dispose of the property without any prior court approval. The agreement may not mention an auction but the auction mechanism is utilised to make the intended disposal known to a wider audience to get the best price and show transparency.

Before buying a house at an auction, the buyer needs to be aware of the issues and complexities involved. The offer price may appear to be cheap but there could be other aspects that could increase the cost of the transaction.

Contractual relationship
To start with, the property may not necessarily be available at the indicated price. This is merely the reserve price at which the bidding will start. Depending on the property and the buyers it has attracted, the price could end up much more than the reserve price.

An auction creates a setting to put in place a contractual relationship between the parties involved. The process starts with the publication of an advertisement.

Following the advertisement, the auctioneer invites bids for a particular item for sale and starts the ball rolling. This is referred to as an invitation to a treat. If a bid is made pursuant to such invitation, that in law constitutes an offer, the auctioneer is free to accept or reject. However, the sale by an auctioneer is concluded when he announces its completion by the fall of the hammer or in any other customary manner.

The next question that arises is: what are the terms and conditions on which the property is purchased? When property is purchased from a developer, there is the standard Sale and Purchase Agreement, if it is a housing accommodation. When a property is acquired through a sub-sale, the terms are set out in the Sale and Purchase Agreement, which is the result of negotiations between the parties.

Conditions of sale
However, the scenario in an auction sale is different. This is because the property is sold based on the Conditions of Sale, which become the terms on which the property is transacted.

These Conditions of Sale are always available before the auction takes place. An individual bidder at the auction ought to obtain and familiarise himself with these terms and conditions before the bid. This is because if the bid is successful, he will be deemed to have entered into a contract on those terms.

An example of a clause in a Condition of Sale which illustrates the risks a bidder must assume when he purchases a property, reads as follows:

“The property is sold on an ‘as is where is’ basis without vacant possession subject to (a) all express and/or implied conditions, restriction-in-interest affecting the Master Land and that which may be imposed/endorsed on the document of individual strata title to the property upon the issuance thereof, (b) all easements, covenants, charges, caveats, liabilities, (including but not limited to liabilities to the local authorities incurred but not ascertained and any rates made but not demanded) and any adverse claims in respect of the Property; and (c) all tenancies, lease, occupiers and rights (if any) of any tenant or occupier, subsisting thereon or therefore without any obligations arising to define the same respectively.”

It is a common and acceptable practice to purchase a property subject to express and implied restrictions endorsed on the document of title. But if there are tenants on the land, the bidder has to take the responsibility of evicting them and bear the costs incurred with the added risk that compensation may not be recoverable. The same would apply in the case of a need to have a caveat removed.

This is different from purchasing a property from a developer or an ordinary individual where the vendor has an undertaking that the property is free from encumbrances which could include caveats, and that the seller will hand over the property to the buyer with vacant possession as part of his obligation.

To reinforce the rights of the seller or rather the seller’s lack of obligations, such Conditions of Sale often provide a condition binding the purchaser to admit that he has inspected the property and is buying it in the condition that it is in. An example of a Condition of Sale which exonerates the seller from handing over the property with vacant possession has a clause which reads as follows:

“The successful purchaser shall at his own costs and expense take possession of the property after the payment of the balance purchase price. The assignee/lender or its agents have no obligation to deliver vacant possession of the property and the successful purchaser is prohibited from entering the property before the payment of the balance of purchase price and/or late payment interest.”

Need for caution
It would be in the interest of the bidder to visit the property and inspect it to familiarise himself with the condition of the property. The photographs in the newspaper or leaflet may not convey the real state of the property which the bidder expects to acquire.

These are just some of the conditions of sale. A detailed examination of the Conditions of Sale in auctions could disclose a host of responsibilities which the seller may exclude himself from.

In conclusion it must be said that a valuable property may well be acquired at an auction. However, there is a need to make adequate inquiries and investigations, and consider all the factors in order to end up with a good bargain.

By The Star (by Bhag Singh)

CIMB offers auctioned properties

KUALA LUMPUR: CIMB Group has launched a service to offer the public the chance to buy real estate that is being auctioned.

The service, called CIMB Property Mart, entails a showroom of such properties, with staff at hand to educate visitors about the auction process. CIMB will also offer financing packages for purchases.

“By setting up the CIMB Property Mart as an alternative sales channel, we hope to raise the profile of auction properties and persuade the public that they represent a viable and sound real estate investment.

Staff will be on hand at the property gallery to answer questions on the properties, action process as well as our financing packages,” said group chief executive Datuk Nazir Razak at the launch.

About RM600 million worth of properties ­— properties and land — foreclosed or owned by CIMB Bank and CIMB Islamic were available for sale as at Nov 30.

These properties mainly comprise apartments, landed properties, development land and shop lots located nationwide with the majority in Selangor, Wilayah Persekutuan, Negeri Sembilan and Johor.

“In future, we hope to leverage on the group’s regional presence and use CIMB Property Mart to attract foreign property investors into the Malaysian property market,” said Nazir.

CIMB Property Mart is located at Grd Flr, Block B, Plaza Damansara, 45 Medan Setia 1 Bukit Damansara, Kuala Lumpur or you can call its hotline number at 1300-88-0811.

By The EDGE MALAYSIA