http://www.straitstimes.com/archive/...lunge-20140830

Silence hangs over Sentosa Cove as luxury unit prices plunge

PUBLISHED ON AUG 30, 2014 1:02 AM


THERE is an eerie silence at night in Sentosa Cove, the man-made island resort billed as Singapore's answer to Monte Carlo and the only place in the country where foreigners can buy landed property.

Dozens of houses - complete with their own private yacht berths and multiple swimming pools - sit empty while few lights are on in the apartment blocks overlooking the marina, a few kilometres away from Sentosa's giant casino.

Prices in the gated community, where Australian mining tycoons Gina Rinehart and Nathan Tinkler bought properties, fell around 20 per cent in the past year as lending restrictions and taxes on foreign buyers bit hard into the luxury real estate market.

Investors could see the value of their assets fall even further with developers and investors still struggling to sell even after the recent price falls. Real estate websites list hundreds of flats and bungalows for sale, yet just 12 apartments and one house have changed hands all year on Sentosa, according to data from the Urban Redevelopment Authority (URA). "The way prices have fallen in Sentosa, it's as if there is a global financial crisis," said Mr Alan Cheong, head of Singapore research at property firm Savills.

That could mean a tough 2015 for the banks unless policy restrictions are eased soon. But that looks unlikely because government-imposed curbs are having the desired effect of keeping the broader market in check after private house prices rose more than 60 per cent between 2009 and last year.

New mortgage business at the country's lenders is up to 40 per cent below last year's levels, although the downturn is unlikely to show up in their balance sheets until next year as loans are typically agreed a year ahead of them starting to be drawn down.

Compounding the problem for property investors are cutbacks in housing allowances for expatriate workers - meaning rents have fallen - and a drop in the number of high-net-worth foreigners being granted permanent residency. Estate agent Knight Frank's analysis of property prices in 32 cities around the world found Singapore's prime residential market, defined as the priciest 5 per cent of properties, performed the worst in the first half of this year, with prices falling 7.3 per cent.

For the luxury sector, the government measures have led to a sharp drop in foreign buyers, who accounted for over half of Sentosa sales between 2010 and this year. That means the number of distressed investors is expected to rise. "Some of the earlier buyers are likely to have bought at prices 20 to 30 per cent above current prices," said Ms Christine Li, head of research at property consultancy OrangeTee. "The rental can't even cover the mortgage for these high-end investments - they want to offload but there are no takers."

United Overseas Bank, Singapore's third-biggest lender, last month reported a doubling in its bad debt charges for the second quarter, saying a group of investors was struggling to service high-end property loans.

The number of residential properties being put up for sale at auction by banks after buyers defaulted on mortgages, known as mortgagee sales, quadrupled to 64 in the first half of this year from 16 in the second half of last year, according to real estate agency Colliers. "This is different from previous years, when owners' sales dominated auctions," said Ms Joy Tan, head of auctions at DTZ. "The tables have turned and we expect more mortgagee sales on the way."

Last month, a four-bedroom apartment in Sentosa's Turquoise condo sold at auction for $3.88 million in a mortgagee sale, or about S$1,400 per sq ft. In 2012, a flat in the same block sold for $2,450 per sq ft and in 2007 for as much as $2,800. The only house that has sold on Sentosa all year - a six-bedroom pad on "Treasure Island" - went for $17 million in February, having been bought for $20.2 million in June 2012.

Some in the luxury property industry fear foreign buyers have gone for good.

City Developments, South-east Asia's second-largest residential property developer, said in its latest results statement that foreign buyers have "shifted and are still shifting their investments to markets outside Singapore".

Sentosa Cove was developed in the early 2000s at a time when Singapore was actively courting the world's wealthy to its shores. It sprang up along with other luxury developments near the glitzy Orchard Road shopping district."Sentosa happens to be a development targeted at a time when the world was leveraging up but now that we have deleveraged, there is a much smaller pool of people who can afford it," Savills' Mr Cheong said.

REUTERS