With prices so low, time to buy a home on Sentosa?

Prices for non-landed homes on the island have tumbled almost 40% since the peak around 2010, but locals still prefer freehold property in prime districts on the mainland

Projects like Turquoise and Seascape, which were sold in 2007 and 2010 at much higher prices, saw more losses when those units changed hands after cooling measures kicked in. ST PHOTO: MARK CHEONG

While private home prices continue to rise, there is one place in Singapore where you can buy a property for almost the same price as 14 years ago.

As improbable as it sounds, the high-end, ultra posh waterfront enclave of Sentosa Cove is now relatively affordable - although you will still need deep pockets.

Prices for non-landed homes have tumbled almost 40 per cent since the peak around 2010 and now hover at about $1,394 per square foot (psf).

That's close to the $1,176 psf seen in 2006 and about what you would pay for a condominium unit in the Toa Payoh area.

But while the number of houses and apartments has been changing hands at ever-lower prices over the past 16 years or so, 77 per cent of those resale transactions were still profitable, a study by The Sunday Times has found.

ST analysis of Urban Redevelopment Authority caveat information that was carried out with data and visualisation expert Yan Naung Oak, founder of consultancy firm Thibi, noted that profitability dropped when Additional Buyer's Stamp Duty (ABSD) was introduced on Dec 8, 2011.

Since then, only half of the resale transactions have been profitable.

Average profits excluding stamp duties and taxes ranged from half a million to almost $5 million.

The biggest loss of $7.12 million was incurred by a British owner at Seven Palms last year.

Industry experts cited several reasons for the huge losses seen in recent years.

Some of the super-rich who flocked to the area were willing and able to let go of their properties at ever-lower prices when they decided to leave Singapore, said property analysts and agents.

There were also homes sold in mortgagee sales after owners defaulted on bank loans following the economic uncertainties such as the ongoing United States-China trade war.

Projects like Turquoise and Seascape, which were sold in 2007 and 2010 at much higher prices hovering around $2,600 psf, inevitably saw more losses when those units changed hands after cooling measures were introduced.

There have been no profitable resale transactions at Seascape and only one resale unit has racked up gains at Turquoise.

ERA Realty research and consultancy head Nicholas Mak said the lack of government promotion of the area and interest from locals were also factors behind the price slumps at Sentosa Cove.

Locals tend to be drawn to freehold property in prime districts on the mainland as land on Sentosa island is leasehold, added Mr Mak.

He also noted that foreigners who are not Singapore permanent residents have to pay 20 per cent ABSD on top of the standard buyer's stamp duty of up to 4 per cent, making it one of the biggest dampeners of the property cooling measures.

Sentosa Cove, which began as a residential zone in 2006, is the only enclave where foreigners can buy landed property, subject to approval.

The area has 2,160 homes ranging from high-rise condominiums to luxury bungalows with adjoining private berths for boats, all aimed at the ultra-rich with its resort living lifestyle.

Foreign buyers reportedly snapped up landed homes between 2009 and 2011, which led to a spike in prices.

In June 2013, Singaporean entrepreneur Mathilda Koh made a capital gain of $18 million when she sold her bungalow for $26 million.

In 2012, SC Global Developments' Seven Palms set a record of $4,200 psf for a 99-year leasehold development when Australian mining magnate Gina Rinehart paid $57 million for two units.

A less enviable record was set in Seven Palms last year, when a British owner incurred an almost 50 per cent loss for his 4,822 sq ft unit when he sold it for $8,880,000 after paying a whopping $16 million in 2010.

The unit was bought by a businessman from Myanmar.

Mr Jeffrey Chow, an ERA Realty branch division director who took six months to sell the ground floor sea-facing unit, told The Sunday Times: "The seller decided to return to his home town for good and he had no more interest in Singapore.

"To the ultra-rich, the loss is not huge. He was collecting rent of $30,000 a month for the unit. Yet he did not want to renew the lease with the tenant."

Professor Sing Tien Foo, director of the National University of Singapore's Institute of Real Estate and Urban Studies, said Sentosa Cove buyers would not typically be so "price-sensitive".

"They are the high-end segment of the market, so they won't be too concerned about the additional taxes when they're buying the unit," he added.

However, he noted that various cooling measures over the years could have contributed to the market slump, although he believes the impact is "minimal" for high-net-worth individuals.

OCBC Bank chief economist Selena Ling said she is not surprised that Sentosa Cove property is stuck in the doldrums while the private residential property market is faring better, given it is underpinned by local demand.

"Sentosa is a very niche market. While it's still true that the super-rich have been less affected by the pandemic as asset markets remain fairly buoyant and liquidity is abundant, plus interest rates are rock bottom, nevertheless the global economy is currently mired in a deep recession this year," she noted.

"Since there's no local demand underpinning the Sentosa property market, it is probably more relevant to compare it with other cities like London, where the rich buy investment properties."

The average holding period for a condo unit in Sentosa is 4.1 years and 3.6 years for a landed home, said Mr Pow Ying Khuan, a senior analyst at SRX.

"With depressed prices and low volumes, we are unable to spot any signs of recovery yet," he added.

As of last week, there were 83 landed properties and 170 condo units for sale, according to SRX listings.

Mr Mak said: "Ultimately, real estate, being the most immovable asset in the world, must cater to the needs of local residents, even if some of the residents are foreigners. Therefore, real estate needs local demand.

"It will go through more volatile booms and busts if it depends too heavily on foreign demand."

A Sentosa Cove home owner, who wanted to be known only as S. K. Cheah, is disappointed that his 1,733 sq ft sea-facing apartment is now "grossly undervalued".

Mr Cheah, 60, who owns several other properties in the east and core central region, paid $3.7 million for a three-bedroom apartment at The Oceanfront in 2007. Today, he said it is worth $2.7 million at best but he has no intention to sell it as he enjoys living on the island

"Foreigners have a privilege to purchase landed homes on Sentosa. I think that privilege should be extended to the removal of ABSD," said Mr Cheah

That should help to give a boost to the Sentosa property market, he added.

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