Transaction volumes at Sentosa Cove may moderate after ABSD hike

Mar 07, 2022

AFTER deals picked up in tandem with the buoyant property market in 2021, transaction volumes for luxury homes on Sentosa may ease this year following the property cooling measures in December.

Encouraged by the robust demand for private homes, developer Ho Bee Land has progressively released units at two of its Sentosa Cove projects since February and March last year: 20 units from the 151-unit Seascape (a joint venture with IOI) that was first launched in 2010, and the remaining 48 units at the 91-unit project Turquoise (first sold in 2007).

Units are priced from about S$1,320 per square foot (psf) to about S$1,700 psf for Turquoise, after discount, and from around S$2,050 psf to S$2,250 psf for Seascape, after a 7 per cent discount off the list price.

Units on sale at Turquoise range from over S$3.1 million to nearly S$4.8 million, and around S$4.5 million to about S$9.5 million for Seascape.

According to the developer, it has sold over two thirds of the units released for sale. Majority of the buyers are owner-occupiers.

A spokesperson for Ho Bee said: "With working from home (WFH) as a default during the pandemic, we noticed that buyers began to appreciate having more space and also prefer homes that are close to nature. We believe demand for large units will continue to be strong due to the new norm of WFH." The spokesperson added that there has also been increased leasing interest for properties at Sentosa Cove during the pandemic.

Analysts expect that transaction volumes at Sentosa Cove may moderate this year following fresh property curbs. These included a big hike in the Additional Buyer's Stamp Duty (ABSD) rate for foreign buyers to 30 per cent, from 20 per cent previously.

In the past, property cooling measures have dampened sales at Sentosa's 117-hectare waterfront housing enclave since it is popular with foreign buyers and investors.

Offering a resort feel, Sentosa Cove is the only place in Singapore where a foreigner who is not a Singapore permanent resident (PR) may purchase for their own use a landed property, albeit with a 99-year leasehold tenure.

Pointing to the property cooling measures and economic malaise arising from the Russia-Ukraine conflict, head of research and consultancy at ERA Nicholas Mak said: "It is likely that sales transaction volume this year would not be as high as that in 2021 due to the headwinds from these two major events."

Similarly, List Sotheby's International Realty (LSIR) Research expects the sales momentum of residential properties to ease in 2022, particularly in H1 2022, as raised upfront costs and more stringent financing conditions from the cooling measures should impact investor demand to some extent.

Singaporeans and PRs buying their first homes, however, are still looking at Sentosa, noted LSIR's senior associate vice-president Steve Tay, adding that interest in viewing activities is returning.

Cushman & Wakefield's head of research Wong Xian Yang said: "For 2022, while the market continues to be supported by stable economic conditions, sales volumes are unlikely to recover to 2021 levels given the latest round of cooling measures."

Wong said that 30 per cent of the 30 landed transactions at Sentosa last year were by foreigners. However, there have been no landed sales to foreigners so far this year, based on the caveats lodged.

Knight Frank's head of research Leonard Tay noted that demand will be supported by the tight supply of saleable inventory and minimal new stock.

Following the cooling measures, "buyers looking for prime properties might find relatively cheaper unit prices in Sentosa a compelling investment opportunity", Tay said, pointing out that the price of non-landed units in Sentosa was some 30 per cent cheaper last year compared to both new and resale units in prime Districts 9 and 10.

At the same time, analysts do not rule out renewed interest from some foreign buyers as Singapore continues to expand its vaccinated travel lane (VTL) scheme. "As more VTLs open up, it will invariably contribute to higher inflow of foreigners who have been planning to relocate to Singapore with their families, especially from the region," said LSIR's Tay, pointing to Malaysia, Indonesia, China and Hong Kong.

Knight Frank's Tay added: "The flight to stability amid geopolitical tensions and uncertainties will continue to lead foreign home buyers to Singapore, and to Sentosa Cove with its unique lifestyle proposition."

A report from ERA's Mak showed that transaction volumes and prices rose at Sentosa Cove during the pandemic even as travel curbs kept foreign buyers at bay, with locals and PRs picking up the slack. The percentage of foreign buyers of condominium units at Sentosa Cove plunged from 21.7 per cent in 2019 to 9.3 per cent in 2020 and 8.6 per cent in 2021.

Mak explained: "The fall in demand was picked up by Singapore buyers, and more significantly, PR buyers. The percentage of Sentosa condo units bought by PRs increased from 26.1 per cent in 2019 to 32.6 per cent in 2020 and remained close to 30 per cent in 2021."

In the landed housing market, Singaporeans accounted for just over half of the 30 homes bought at Sentosa Cove in 2021, up from about 30 per cent in 2020 and 43 per cent in 2019.

The ERA report showed that overall transactions for non-landed residential units at Sentosa Cove jumped 87 per cent year-on-year to 43 units in 2020, before roughly tripling to 128 units in 2021 - a level last seen in 2011.

Over the years, transaction volumes have fallen from the peak of 518 units in 2006.

During the Global Financial Crisis (GFC), non-landed transactions slumped 73 per cent year-on-year in 2008 before doubling to 131 units in 2009. However, volumes slid again in 2011 when the government rolled out the ABSD and again in 2018 when ABSD rates were raised.

A similar trend has played out for landed houses at Sentosa Cove, with transaction volumes taking a hit during the GFC in 2008 when only six units were transacted. Volumes tumbled again whenever the government introduced curbs to cool the red-hot market, such as when ABSD was unleashed in 2011, when the ABSD rate was increased in 2013 and 2018, as well as the implementation of the total debt servicing ratio in 2013.

Some 30 landed homes were sold at Sentosa Cove in 2021 as the low interest rate environment and ample liquidity sent the rich scouring for luxury homes.

In the resale market, four condo units and two bungalows have been transacted at Sentosa Cove this year to date.

Prices for condominium units have also risen over the last two years, although they remain far from the highs notched in 2010, the ERA report showed.

After peaking at S$2,264 psf in 2010, the median transacted price of condominium units at Sentosa Cove has fallen after multiple rounds of cooling measures before bottoming out at S$1,429 psf in 2019. In 2021, the median price for Sentosa Cove condominiums rose 7.5 per cent year-on-year to S$1,555 psf in 2021.