Going south

The sharp falls in Sentosa Cove’s home prices are renewing interest in the area, but the upturn may not be sustainable

Francis Kan

IT WAS once hailed as the most exclusive address in Singapore. But for some homebuyers, living on an island off the mainland is perhaps a tad too exclusive for their liking.

Sentosa Cove has hit the headlines over the past year for the multi-million-dollar losses its sellers have suffered. The Russian owner of a 379 sq m unit at the waterfront Seascape condominium sold it for a whopping $6.6 million below its purchase price in an auction — the biggest loss yet among properties in the luxurious district.

According to a report by global property advisor CBRE, only 11 of the 30 Sentosa Cove properties transacted between April 2016 and March 31, 2017, have been in the black.

SIGNS OF A REVIVAL

Analysts say that the value of the posh enclave — the only one where foreigners who are not permanent residents can own landed property — has been hurt by a perception that its location is too inaccessible and hence, less desirable than luxury homes in Districts 9 and 10.

Ironically, the sharp falls in prices have led to renewed interest in the area from bargain hunters of luxury homes.

In 2017, Sentosa Cove property prices have fallen by around 30 to 40 per cent compared to the peaks seen in 2010.

Bungalow prices, meanwhile, are down around 20 per cent from the previous year, making them roughly equivalent to mass-market condominiums on a per square foot (psf) basis.

According to Mr Desmond Sim, CBRE’s head of research for Singapore and South-east Asia, this may not increase interest in the area by much.

“Sentosa Cove has had some price corrections over the years, presenting a better value proposition to buyers. But I don’t see a quick rebound as these are still big-ticket items.” he says.

SLOW MARKET DEMAND

Data shows that 11 Sentosa Cove bungalows were sold in the first 10 months of last year at an average of $1,596 psf. This is down 15 per cent from the average selling price of $1,881 psf in the second half of 2016, when only four bungalows were sold.

Condominium sales have also been picking up, with 21 units changing hands in the first half of this year, compared to average annual sales of between 24 and 26 units in the previous four years.

Mr Bruce Lye, a managing partner at property agency SRI who has brokered several transactions in the area, is seeing more interest in Sentosa Cove.

“I used to get one or two queries every month, but there has been a more consistent ow of enquiries this year,” he says.

The renewed interest in Sentosa Cove bungalows is consistent with a recovery in the demand for landed homes this year, which is on track for the best showing in ve years.

PUTTING IT IN PERSPECTIVE

Putting into perspective the headline-grabbing losses such as those at Seascape, market watchers say that those homes were probably overpriced to begin with.

For instance, the Russian seller of the Seascape unit had paid about 16 per cent above market price when he made the purchase in 2010.

The sellers who suffered huge losses could also have been pressured to sell their properties because they were facing a cash crunch and were unable to service their loans, says Mr Lye.

He adds that many homeowners had faced liquidity issues due to the challenging economic climate. For instance, several owners who worked in the oil and gas industry were forced to sell their units at a loss when the industry suffered a downturn.

But Mr Sim warns that it is uncertain whether the Sentosa Cove’s fledgling recovery is sustainable, in view of cooling measures that are still in place and rising interest rates.

“It’s too early to tell if there will be a price recovery,” he says.