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Sentosa Cove: The coast is clear for some

By Feily Sofian / The Edge Property | June 10, 2016 10:03 AM MYT


In the real-estate market, few properties can beat those with a water view when it comes to the wow factor. Sentosa Cove recently made headlines for contrasting reasons — one property fetched sky-high prices while others were in deep water. It might be time to revisit Sentosa Cove as condominium rents and prices in this upscale district could be near their bottom - for tenants and owner-occupiers.

Touted as the Monte Carlo of Asia and offering the only true waterfront living in Singapore, Sentosa Cove has seen falling condo rents boosting rental volume. A total of 230 rental deals for Sentosa Cove condos were concluded in the first four months of 2016, up from 206 in the same period in 2015 and 167 in 2014, according to the latest statistics by URA.

The average condo rent per transaction has expectedly shrunk, to $8,576 between January and April this year, from $8,875 in the same period a year ago.

Interestingly, the higher rental volume in Sentosa Cove bucked the trend for the Core Central Region, where rental transactions for private non-landed homes fell from 6,805 in the first four months of 2015 to 6,489 in the same period this year.

There are signs that condo rents in Sentosa Cove could be near a bottom. Although the median monthly rent has declined 12% from $4.51 psf at the peak in 3Q2013, it has hovered in the $4-to-$4.10 psf region over the past five quarters (see Chart 1).



Those who are not into solitude living might wish to narrow down their choices to The Berth by the Cove, The Coast at Sentosa Cove, The Oceanfront @ Sentosa Cove and The Residences at W Singapore Sentosa Cove. These developments were visibly brighter than others, indicating a decent occupancy rate, when The Edge Property team dropped by on a Friday and a Tuesday evening. Many projects, on the other hand, were cloaked in darkness (see photo on next page).

Condo units at The Coast overlook both the open sea and the waterway. Meanwhile, a majority of units at The Oceanfront are fronted by the open sea and the marina.

Most condo projects in Sentosa Cove have shaved off around $1,000 in monthly rents since 3Q2013’s peak. The average monthly rent for three-bedroom units (2,000 to 2,100 sq ft) at The Coast, for example, has stayed flattish at between $7,100 and $7,200 since 2Q2015, a sharp markdown from $8,050 in 3Q2013. At The Oceanfront, the average monthly rent for three-bedroom units (1,700 to 1,800 sq ft) dropped from $7,383 in 3Q2013 to $6,400 in 1Q2016, while that at The Residences at W (1,600 to 1,700 sq ft) fell from $7,959 to $6,925 over the same period. Prospective tenants who are keen on Sentosa Cove could start house-hunting.

Not for investors yet

Here's why.

Among the property submarkets, Sentosa Cove has been the hardest hit by the property curbs and prices have been on a downtrend since 2011. At actively transacted condo projects, prices dipped 26% from $2,071 psf in 2011 to $1,531 psf in 2016 to date (see Chart 2). Only nine caveats were lodged for condo units between January and May. Five of the nine deals were transacted at a loss. The most notable of these was the sale of two units at Turquoise, at a loss exceeding $2.5 million each. Separately, another seller took in a $1.1 million loss from the disposal of his unit at The Coast.

It is, however, compelling to think that Sentosa Cove condo prices may have stabilised. At $1,531 psf, the average condo price in Sentosa Cove is on a par with those in city-fringe projects. On May 6, a 2,433 sq ft, low-floor unit at Caribbean at Keppel Bay, a 99-year leasehold condo that was completed in 2004, changed hands at $1,583 psf. Subsequently, a 2,519 sq ft, high-floor unit at Reflections at Keppel Bay fetched $2,462 psf.



Samuel Eyo, managing director of Singapore Christie’s International Real Estate, thinks prices are unlikely to drop much further, owing to limited supply, and barring any new shocks. Developers are also holding on tightly to their unsold units and opting to lease them out instead of slashing prices. The only exception would be distressed sellers at auctions.

Eugene Lim, key executive officer at ERA Realty, notes: “A standout transaction this year was at Seven Palms Sentosa Cove, where a buyer paid $15.8 million ($3,721 psf) for a third-floor unit in March. Hence, there are still high-net-worth individuals willing to pay high prices for the luxurious lifestyle that Sentosa Cove offers, be it the beachfront living or the panoramic views of the South China Sea.”

Still, the condo market in Sentosa Cove could be heading for an L-shaped recovery. According to Eyo, the main drawback for Sentosa Cove properties is their 99-year leasehold tenure. There is also a host of attractive projects on the mainland that compete for buyers. However, Sentosa Cove offers a unique waterfront lifestyle like no other in Singapore, he adds.

For now, Sentosa Cove might be a better fit for owner-occupiers and tenants who value such a lifestyle than for investors. For this group of people, the risk of price and rental downsides has been significantly lowered.

Is the coast clear? Sentosa Cove might be a better fit for owner-occupiers and tenants as the market is likely to head for an L-shaped recovery



This article appeared in The Edge Property Pullout, Issue 732 (June 13, 2016) of The Edge Singapore.