Property prices at Sentosa Cove drop to record low, a unit just sold at 50% loss

As prices of Sentosa Cove properties drop to a record low, a condominium unit at a development called Seascape on the resort island was recently sold at a 50 per cent loss.

The 2,336 sq ft three-bedroom unit was sold for S$3.1 million on May 23, which is S$3.2 million below its original purchase price of S$6.27 million in 2010, based on information from the Urban Redevelopment Authority’s transaction database, Realis.
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Data from property consultancy Cushman & Wakefield showed that the median resale price for Sentosa Cove non-landed properties so far this year has dropped to S$1,367 psf — a record low since luxury homes were first launched on the island in November 2004. The peak median price was S$2,200 in 2010.

In the month of May, the other two non-landed transactions on Sentosa also posted losses, though marginal.

At a condominium project called The Coast at Sentosa Cove, a 4,779sqf unit was sold for S$6.52 million, a 3.8 per cent drop from the original purchase price of S$6.78 million in 2006.

Another condominium unit at The Berth by the Cove, with an area of 1,302sqf, was sold at S$1.78 million, a 1.1 per cent decline from the purchase price of S$1.8 million in 2007.

Based on caveats lodged, the transaction prices of Seascape units have come down sharply over the past year or so. Two units which are about the size of the one sold last month transacted at significantly higher prices: A 2,680 sq ft unit was sold for S$4.6 million (or S$1,716 psf) in September last year, while a 2,164 sq ft unit changed hands for S$4.5 million (or S$2,080 psf) in March last year.

HEAVILY MARKETED TO FOREIGNERS

Analysts agreed that the cooling measures that came into effect in July last year played a role in bringing down its prices, with Mr Wong Xian Yang, senior research manager at Cushman & Wakefield, noting that the measures “have not been kind” on Sentosa Cove properties.

As a luxury enclave heavily marketed to foreigners, the costs of buying a property at Sentosa Cove have gone up considerably for them.

The Additional Buyer’s Stamp Duty (ABSD) was increased to 20 per cent for foreigners buying any residential property.

However, analysts agreed that the latest cooling measures are just one part of the story.

Based on Cushman & Wakefield’s data, prices of non-landed properties in Sentosa Cove have generally been declining since 2011, way before last year’s cooling measures.

When private property prices across the country turned after a four-year decline and jumped 9.1 per cent from 2017 to 2018, Sentosa’s non-landed properties only managed to go up slightly around the same period — 0.8 per cent in 2017 and 1.6 per cent in 2018.

Mr Desmond Sim, head of research for Singapore and South-east Asia in property firm CBRE, said that the increase in overall prices then was on the back of new property launches and increasing land acquisition costs.

Given that there were no new launches in Sentosa then, it “did not benefit from the upswing”, Mr Sim said.

DROP IN SPECULATIVE BUYERS

Rising interest rates and earlier cooling measures, as well as stricter credit controls in China are among some of the other factors that have led to the continuing decline of home prices at Sentosa Cove, property analysts said.

Mr Wong from Cushman & Wakefield said that there were earlier rounds of cooling measures, such as the introduction and tightening of the Sellers’ Stamp Duty. Home-owners who sell their property within three years after purchase would be liable to pay Seller’s Stamp Duty. The faster they sell it after the date of purchase, the higher the tax.

This effectively curbed speculative buying, he said.

And speculators used to form a big proportion of buyers at Sentosa Cove, as pointed out by Mr Alan Cheong, senior director of research at real estate service provider Savills.

Another earlier cooling measure was the introduction of the Total Debt Servicing Ratio in 2013, which required banks to ensure that the monthly debt obligations of home-buyers cannot exceed 60 per cent of their household monthly income. Dr Lee Nai Jia, senior director at property consultancy Knight Frank, said that this caused prices to drop.

NO MORE ‘EASY MONEY’

Besides speculators, the other group of buyers included those “who had too much money to spend”, Mr Cheong said.

Liquidity was easily available during the period before the 2008 global financial crisis. Mr Cheong referred to this as “the go-go years”, due to looser credit controls in China and debt-fuelled asset purchases in the Western economies.

Many initial foreign buyers of Sentosa Cove properties were from China. However, tighter credit controls in China that came when Mr Xi Jinping took over as president in 2013, as well as reforms to the global banking systems after the financial crisis, meant all that “easy money” has largely disappeared.

Many earlier buyers have had to sell their Sentosa Cove units as they ran into liquidity issues, Mr Cheong noted.

The profile of buyers now has also changed. “People are now talking about wealth preservation, not talking about having money to throw. It’s not the days of the Lamborghini… you have to make your money work,” he said.

Mr Sim said that globally, the rising interest rate environment has also compounded the issue, with investors finding it increasingly difficult to generate good returns.

RENEWED INTEREST, MAYBE

Analysts believe that it will be a matter of time before the real estate market at Sentosa Cove will turn.

With prices now similar to some new condominium projects on the mainland targeted at the mass market, buyers may realise that properties at Sentosa Cove could hold value over the long term.

Dr Lee from Knight Frank said that he is already seeing more interest in Sentosa Cove properties in the past month.

He added that Singapore is probably still seen as a safe haven compared with other luxury property markets in the region, and that may attract a group of investors interested in wealth preservation.

Source: Today – 14 Jun 2019

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