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Published November 27, 2006

Speculators make a killing from Sentosa condos

Sub-sales fetch profits of 7-35% for projects in Sentosa Cove, caveats show


KALPANA (SINGAPORE) Property speculators are having a field day in Sentosa Cove, reaping profits of between 7 and 35 per cent from sub-sale deals in condominium developments there.

One of the most lucrative deals reflected a gain of about $1 million over a mere two-month holding period for a unit at The Oceanfront @ Sentosa Cove.

A sample analysis of sub-sale transactions by DTZ Debenham Tie Leung - based on caveat data captured by URA's Realis system - shows that on average, speculators have reaped a gross premium of $647,000 from sub-sale transactions in the 15-storey The Oceanfront @ Sentosa Cove condo, which was launched by City Developments and TID in July this year.

Over at Ho Bee's The Berth by The Cove - the first condo to be launched in Sentosa Cove when it was released in late 2004 - the average speculation premium is $387,000.

At Frasers Centrepoint's The Azure which was released last year, the average sub-sale premium is $321,000. These are gross premiums and about 4.5 per cent has to be deducted to arrive at net gains - to factor in 3.5 per cent for stamp duties and legal fees when buying a unit, and one per cent agent fees when selling it.

Oceanfront, Berth by The Cove and Azure are the first three condo projects in Sentosa Cove. All three have 99-year leasehold tenure.

Sub-sales - often used as a proxy for the level of speculation in the property market - refer to secondary market transactions in a project before it receives a Certificate of Statutory Completion (CSC). This certificate is usually obtained within a year of a project receiving a Temporary Occupation Permit.

Sub-sale deals at The Oceanfront appear to have been the most lucrative in terms of absolute-dollar profit. But percentage-wise, the biggest gains were reaped at The Berth by The Cove. This was launched two years ago when prices were relatively low, translating to high profit margins for those who have sub-sold units this year. Sub-sale premiums ranged from 7 to 35 per cent at The Berth by The Cove.

The single most lucrative sub-sale deal - in absolute-dollar terms - was for a 5,242 sq ft unit on the 11th floor unit of The Oceanfront. This property changed hands last month for $6.8 million - a premium of slightly over $1 million to the original $5.7 million the seller had paid the developer for the unit in August.

Typically, a sub-sale involves buyers who have bought properties from developers selling units in the secondary market before a project's CSC. There can also be repeat sub-sales, where a unit changes hands more than once in the secondary market before the project receives CSC.

DTZ's analysis reflects two repeat sub-sales - one each at The Oceanfront and The Azure. The Oceanfront unit, on the eighth floor, which was sub-sold in August for $4.4 million and then sub-sold again less than a month later for almost $5.3 million, creaming a handsome $850,000 premium.

Data on the original price at which the developer sold the unit was not available. A market watcher suggested that those who bought units from developers did so with an eye of flipping them soon and so may not have bothered to lodge a caveat.

DTZ's sample analysis is based on 27 sub-sale transactions, but BT understands that there have been more than 60 sub-sale deals for condos in the upscale waterfront housing locale. Data on the original developers' sale prices for the other 36 or so units is not available. The 60-odd sub-sale deals so far at the three Sentosa Cove condo projects reflect about 10 per cent of the total number of units in these developments.

The latest condo in Sentosa Cove, Ho Bee's 249-unit The Coast, is 85 per cent sold and is also said to have attracted speculators, although caveats of sub-sale deals will only emerge later, market watchers say.

DTZ executive director Ong Choon Fah says that despite the lucrative gains from sub-sales in Sentosa Cove, on a macro basis sub-sales remain confined to a few locations and developments such as Sentosa Cove, The Sail @ Marina Bay and Icon.

Highlighting the draws of Sentosa Cove, she says: 'This is the only place in Singapore where you get true waterfront homes, meaning your home is open to the water's edge. And there's a limited supply. A lot of effort has been made to market the precinct to high net worth foreigners.'

According to Mrs Ong: 'A little bit of speculation provides liquidity. If somebody has a good eye and business acumen and is rewarded for it, I don't think we should be too concerned. It's a willing-buyer, willing-seller situation.' Q3 sub-sales of S'pore apartments surge 69%, P2