Sentosa Cove boomlet rocked by property cooling measures

/ EdgeProp Singapore |
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SINGAPORE (EDGEPROP) - It had been at least three years since the last house-buying wave at Sentosa Cove, Singapore’s premium waterfront enclave. This year, it has rallied. “Bungalow demand is the highest in eight years,” says Steve Tay, senior associate vice president at List Sotheby’s International Realty. Of the top 10 bungalow deals in Sentosa Cove this year (based on caveats lodged), he sold four of them.
Tay recently brokered two other bungalow deals where caveats have yet to be lodged. One is a golf course-facing bungalow at Cove Drive with a land area of 8,300 sq ft that had changed hands for over $2,300 psf. The other is also at Cove Drive but fronts the waterway and sits on a smaller site of 7,700 sq ft. That was sold for $2,052 psf.
Up until the Dec 16 property cooling measures, well-built and nicely renovated bungalows at Sentosa Cove have been commanding prices above $2,000 psf, says Tay. “Prices in Sentosa Cove had hit a new benchmark,” he adds. “It’s still below peak prices in 2010 to 2012.”
The seafront bungalow at Ocean Drive sitting on a land area of 8,746 sq ft was sold for $17.888 million ($2,045 psf) in October

More owner-occupiers

In comparison, well-renovated bungalows in prime districts on the mainland have been going for $2,600 psf this year, Tay points out. “This time around, prices achieved at Sentosa Cove are in line with demand and market valuation, and are not at bubbly levels,” he argues. “Almost all the buyers are owner-occupiers, not speculators.”
This is in contrast to the heyday of 2010 to 2012, when the opening of the two integrated resorts had led bungalow prices to soar to a peak of $3,214 psf for a 10,111 sq ft oceanfront bungalow that changed hands for $32.5 million in October 2012. “The property cooling measures in 2013 led to a drop in demand, and a reset in pricing,” he notes.
Bungalow transactions at Sentosa Cove then plunged to just a handful of sales per year between 2014 and 2016. Prices sank to a low of $1,108 psf in September 2016: it was for the sale of an 8,126 sq ft bungalow at Cove Drive that changed hands for $9 million. Transactions revived in 2017 and 2018, before falling back to just four houses sold for the whole of 2019 after the property cooling measures were imposed in July 2018.

Rebound in transactions, prices

Last year, 13 bungalows changed hands at Sentosa Cove, and for the first 11 months of this year, URA Realis recorded 24 bungalow transactions, which is an 85% y-o-y jump, according to List Sotheby’s research director, Han Huan Mei. Average bungalow prices rose 4% over the past year.
The bungalow at Cove Drive named “Copper House” which sits on an 18,053 sq ft site fronting the sea changed hands at $43.66 million ($2,419 psf), making it the biggest bungalow deal in Sentosa Cove this year, both absolute and psf terms (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Condominium transactions staged an even stronger rebound, with 115 units sold as at end-November, a 167% pick-up from 43 units in 2020. Meanwhile, average prices were 14% higher y-o-y. Prices at Sentosa Cove had stagnated in recent years due to the 99-year leasehold tenure and the absence of new projects on the island, notes Han.
For example, the average price of the condominiums at Keppel Bay on the mainland jumped 25% to $1,968 psf from end-2020. Han attributes this to the launch of the 429-unit The Reef at King’s Dock in January 2021, which saw 280 units sold at an average price of $2,330 psf on its first day of launch, with prime waterfront units fetching prices above $2,800 psf. Meanwhile, Sentosa Cove’s average condominium prices climbed 14% over the same period to $1,702 psf, she adds. (Browse newly launched condos in Singapore right now)
Lewis Cha, executive director of List Sotheby’s, attributes the lifestyle changes due to the pandemic as another major factor for the surge in buying interest at the waterfront residential enclave this past year. “As people spend more time at home, there’s a need for more living space and private outdoor space,” he says. “Many prefer bigger, more comfortable homes with a nice environment, amid greenery or by the sea.”
Demand was driven by a steady increase in investor confidence, as Singapore’s economy staged a recovery and is on track to achieve a GDP growth of 6-7% in 2021, comments Cha.
Seascape accounted for six of the top 10 condo deals in Sentosa Cove this year (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Potential home buyers and investors began to realise the “value for money” opportunities that emerged in Sentosa Cove when prices of new project launches on the mainland surged. For instance, in the Core Central Region (CCR), the 540-unit Irwell Hill Residences, which sits on a 99-year leasehold site, saw over 50% of the units sold at its launch weekend in April at an average price of $2,700 psf. At Midtown Modern, also 99-year leasehold and located in the CCR, 61% of its 558-units were snapped up at an average of $2,800 psf in March. Last month, the 99-year leasehold CanningHill Piers at Clarke Quay registered 77% sales at an average price of about $3,000 psf.
This explains why buying interest picked up significantly in Sentosa Cove in 2021, notes List Sotheby’s Han.

Local buyers, PRs led purchases in 2021

According to URA statistics, purchases in 99-year leasehold non-landed homes in District 4 (which includes Sentosa Cove, Keppel Bay and Telok Blangah) saw a 41% increase among foreign buyers from 2020 to 2021 year-to-date. The biggest jump, however, came from permanent residents (PRs) and Singapore citizens, which saw 108% and 394% growth, respectively, over the past year.
“These could be buyers who saw a window of opportunity to acquire bigger homes and to enjoy a resort island lifestyle before prices at Sentosa Cove rose in tandem with those on the mainland,” says List Sotheby’s Han. Recent bungalow buyers at Sentosa Cove have been a good mix of nationalities, from Singaporeans to mainland Chinese, Malaysians and Indonesians, notes Tay.
Next year, interest rates are expected to increase as inflation has started to bite, says Samuel Eyo, managing director of Lighthouse Property Consultants. In this latest round of property cooling measures, there is a 10% hike in additional buyer’s stamp duty (ABSD) to 30% for foreigners buying residential property. “This could hurt demand for bungalows in Sentosa Cove, as it’s the only place where foreigners are allowed to buy landed property,” says Eyo.
Seven Palms led the top 10 condo deals this year - in absolute and psf prices (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Even Singaporeans and PRs have not been spared. For Singaporeans buying their second property, the ABSD has increased to 17% from 12% before; and those buying a third or subsequent property will be subjected to 25% ABSD, from 15% before.
PRs buying their first property will not be affected as the ABSD will remain at 5%. However, they will now have to stump up 25% ABSD for a second residential property purchase and 30% for a third or more.
In the medium to longer term, the fact remains that the supply of bungalows in Sentosa Cove is limited (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Pause in sales’

The latest property cooling measures are likely to lead to “a pause in sales momentum” as buyers and sellers observe the impact of the new regulations, says List Sotheby’s Tay. “There might be some downward pressure on pricing expectations, especially for buyers who have to pay higher ABSD,” he concedes.
In the medium to longer term, the fact remains that the supply of bungalows in Sentosa Cove is limited. “There are only 350 bungalows and less than 2,000 condominium units in Sentosa Cove, and they are not going to increase,” notes List Sotheby’s Tay.
There are foreigners who want to relocate to Singapore and who still desire to own a waterfront home — either a house or a condominium, he adds. “Eventually, buyers will accept the higher ABSD as part of the transaction cost of buying a home in Singapore,” says Tay. “Those who want to relocate their families to Singapore will continue with their plans, although they are likely to be more cautious when it comes to prices.”

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