[b]Sentosa Cove: Is a rebound in prices on the horizon?

The announcement of the Draft Master Plan 2019 has raised expectations of an appreciation of prices of Sentosa Cove private homes.[/b]

Mon, Apr 29, 2019

WITH the Draft Master Plan 2019 outlining plans for the Greater Southern Waterfront and the recent announcement to further develop the Integrated Resorts, is a rebound in prices on the horizon for the private homes in Sentosa?

An integrated residential-marina resort development on the eastern coast of Sentosa island, Sentosa Cove is an exclusive enclave comprising high-rise condominiums and luxury bungalows, with adjoining private berths for boats. One of the most desirable addresses, it has attracted many foreign investors, who favour its landed properties in part due to local laws limiting purchases of such homes to those on Sentosa island. On the mainland, foreigners who wish to buy a landed home are required to seek approval under the Residential Property Act.

Data from REALIS demonstrates that foreign buyers were indeed most active during the run-up in prices in Q2 2017, with international buyers acquiring 12 of the 37 landed homes transacted on Sentosa.

During the next run-up in prices from 2009 to 2011, foreign buyers actively took up available landed homes in the market, contributing to significant price increases from 2009 to 2013. For instance, a 637 sqm landed residential property at Cove Drive transacted at approximately S$13.6 million in June 2010, with the negotiated price of the same property rising to S$17.9 million in slightly over a year.

However, demand began dwindling following the introduction of Additional Buyer's Stamp Duties (ABSD) and the Total Debt Servicing Ratio in June 2013. Some owners sold their properties at a loss, redirecting their funds to other assets or properties in overseas markets that were growing. For instance, a property at Treasure Island was acquired for S$20.2 million in June 2012, but later changed hands for S$17 million in February 2014.

The return of buying sentiments towards the end of 2017, however, aided the sale of the property in September 2017 to transact at S$20 million.

The latest round of cooling measures announced in July 2018 has since dampened buyer interest once more, with foreign buyers required to pay even higher ABSD rates.

Sales of landed properties in Sentosa dropped, though prices were significantly off their usual mark. For instance, a landed property at Paradise Island transacted at S$14 million in October 2018, lower than the S$22 million price transacted in September 2012.

Still, there may be an upturn in prices in future, given that prices of Sentosa landed properties were closer to the bottom in 2015 than in 2012.

Following the announcement of S$9 billion worth of investments to be pumped into the Integrated Resorts and to develop the Greater Southern Waterfront under the Draft Master Plan 2019, the potential of capital appreciation for landed properties in Sentosa may be even more likely down the road.

Plans include Marina Bay Sands' intention to add a new entertainment arena and hotel tower, while Resorts World Sentosa will expand its Universal Studios Singapore theme park to include attractions such as Minion Park and Super Nintendo World.

The Greater Southern Waterfront, which will span from Pasir Panjang to Marina East, will be transformed into a desired location for urban living along Singapore's Southern coast. The area will be developed in phases, beginning with the repurposing of the Pasir Panjang Power District, also known as "Power-Up Pasir Panjang". The Keppel Club site will also be redeveloped into a new residential precinct, enhancing the Mount Faber area while improving the accessibility to nature parks and the Central Business District.

Such comprehensive plans and developments naturally have a ripple effect on its surrounding areas, creating further interest on potential peripheral benefits.

When the concept from the winning bid by Resorts World Sentosa was first revealed in Q4 2007, the median price of non-landed properties in the Bukit Merah Planning Area (includes Mount Faber and Harbourfront among others) and Southern Islands Planning Area (includes Sentosa) rose by 64 per cent, a year later after the project was awarded (chart 2). In contrast, the islandwide property price index for non-landed homes by the Urban Redevelopment Authority went up by 33 per cent over the same period.

Moving forward, buyers are expected to remain discerning and sales are likely to slow. However, this gives way to opportunities for home acquisition, while keeping the longer investment horizon in mind. With upcoming plans to boost select areas in Singapore in place, prices of landed homes in Sentosa are likely to appreciate when the market recovers, particularly for uniquely designed landed properties in Sentosa Cove.

[I]The writer is head of research, Knight Frank Singapore[/I]