Without a game changer, Sentosa Cove condos will continue underperforming

Should a primary school be located in Sentosa?

Apr 29, 2024

Singapore’s island resort of Sentosa, located off its southern coast, is a major tourist destination. Visitors flock to Resorts World Sentosa (RWS), where key attractions include a casino, the Universal Studios Singapore theme park, Adventure Cove Waterpark and Sea Aquarium.

Sentosa boasts numerous hotels, food and beverage outlets, shops, convention facilities, beaches, a world-class golf course, historical sites and so forth.

Families looking to splurge can stay at Shangri-La Rasa Sentosa. Sentosa’s Capella Singapore hosted the summit meeting between then US President Donald Trump and North Korean leader Kim Jong Un in 2018, and is popular with celebrities.

Fancy living on the resort island? This idea may not hold much appeal for locals, judging by home prices of apartments in Sentosa Cove, located on Sentosa’s eastern coast and in the Core Central Region (CCR).

Recently, a unit of property group City Developments Ltd : C09 0% sold 65 homes at The Residences at W Singapore Sentosa Cove at an average price of S$1,780 per square foot (psf). This low-rise condominium development, located along Ocean Way, was completed in 2011 and sits on 99-year leasehold land with about 81 years remaining.

Underperformance

In context, pricing of S$1,780 psf is substantially below that of many suburban private homes – new condos in the Lentor area may sell for over S$2,100 psf.

Units sold on the first booking day at the recently launched The Hill @ One-North, which is located at Slim Barracks Rise, fetched an average price of approximately S$2,595 psf.

The average psf price achieved for the recent transactions at The Residences at W is about 36 per cent below that of S$2,793 psf for 20 transactions in Q2 2010 at around the time of the project’s launch, based on caveats lodged.

In short, buyers at the initial launch could be staring at a huge mark-to-market loss.

Sure, The Residences at W’s design may not be the most up to date and the development might suffer from some wear and tear.

Also, a leasehold property’s value falls as the number of years of land lease remaining decreases.

Based on the table showing leasehold values as a percentage of freehold value that the Singapore Land Authority uses when computing differential premium, a land parcel with 81 years of remaining land lease is worth around 4.8 per cent less versus one with 99 years of land lease outstanding.

Still, initial buyers of The Residences at W have fared poorly compared with many others who bought private homes at around the same time, considering the performance of home prices since Q2 2010.

Between Q2 2010 and Q1 2024, prices of non-landed private homes rose 50 per cent, with private non-landed home prices in the CCR up 19 per cent according to the Urban Redevelopment Authority’s price indices.

The CCR region underperformed in part because housing demand there was particularly hit hard by the hike in Additional Buyer’s Stamp Duty (ABSD) on foreigners who are not permanent residents (PRs) and investors.

Today, a non-PR foreigner buying any home pays 60 per cent ABSD. A Singapore citizen pays ABSD of 20 per cent for buying a second home and 30 per cent for buying a third and subsequent home.

Game changer

Nonetheless, within CCR, non-landed homes in the Bukit Timah Road area continue to do well as they appeal to Singapore residents who are buying homes for owner occupation.

Singapore citizens and PRs pay ABSD of 0 per cent and 5 per cent, respectively, when buying their first home.



At the private preview in November 2023 of freehold Watten House in the Bukit Timah Road area, there were strong sales for developers UOL Group and Singapore Land Group, with an average price of S$3,230 psf.

Might the key to improving the fortunes of non-landed homes in Sentosa Cove lie with increasing their appeal to locals buying for owner occupation?

Some delivery persons loathe going to Sentosa. Also, Singapore has many other locations with arguably better transport connectivity compared with Sentosa.

Still, Sentosa is hardly isolated. It enjoys connectivity to Singapore’s mainland by road, cable car, pedestrian boardwalk and monorail.

Maybe Sentosa Cove needs an MRT station to lure more locals to aspire to live there, given the fondness of local homebuyers for homes in close proximity to MRT stations.

Subject to feasibility studies, Sentosa can perhaps house an established primary school and other leading educational institutions. A tranquil nook of Sentosa may offer a suitable yet differentiated location for a primary or secondary school, versus mainland Singapore. And siting a popular school in Sentosa could in turn be a game changer for Sentosa Cove homes.

After all, one key reason behind the Bukit Timah Road area’s popularity with local homebuyers is that the neighbourhood has various well-regarded primary schools and educational institutions.

Sure, many locals are single or married without children. However, such locals might prefer owning homes in areas that are popular with local families who have children as the former wants to own a home that has rental appeal and is easy to divest in future.

Continued investment, such as RWS’ expansion, will enhance Sentosa’s allure as a tourist destination.

However, the island resort’s success in drawing tourists including high-spending ones may not help to boost the performance of Sentosa Cove condos.

Amid more private-housing completions and launches, tenants as well as buyers are increasingly spoilt for choice. Could Sentosa Cove condos see their relative underperformance versus other locations worsen?

Indeed, even landed homes in Sentosa Cove may be getting a frosty reception from buyers. While high-profile deals have recently been struck for bungalows in District 10, an auction last week of 69 Ocean Drive, which belonged to one of the 10 foreigners arrested in the S$3 billion money laundering case, failed to secure a buyer. Only one bid was placed at S$20 million – well below the guide price of S$27.1 million.

Unless there are changes to the ABSD regime, Sentosa Cove condos may need a major game changer to get more local owner-occupiers to move there. As it stands, the appeal of living in an oceanfront marina residential community appears insufficient for many Singaporeans.

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