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Sentosa condo prices attractive: Colliers
Gap with 99-year mainland properties narrows in both prime, mass markets
By: Kalpana Rashiwala
A WINDOW of opportunity has opened for buyers in the Sentosa Cove condo market as prices in the upscale waterfront housing district are now attractive relative to both the high-end and mass markets on the mainland, Colliers International said in a White Paper issued yesterday.
The median price of 99-year Sentosa Cove condo units has dropped 44.2 per cent over two consecutive quarters, from $2,950 per square foot (psf) in Q1 2013 to $1,646 psf in Q3 - a pricing level that is about 1.5 per cent lower than their 99-year-leasehold counterparts in Districts 9, 10 and 11 as well as the financial district on the mainland.
"Considering that prices of condominiums in Sentosa Cove once climbed as high as 133.1 per cent above their mainland counterparts in Q1 2008, this about-turn today represents a possible window of opportunity for value investment and to snare a dream home," said Colliers.
Also, the $1,646 psf median price in Q3 is just 25.6 per cent more than the $1,311 psf median price of 99-year mass-market condos in Outside Central Region in the same period.
"This is in stark contrast to the 77.6 per cent difference registered when condo projects were first sold in Sentosa in Q4 2004, and the gaping 315.9 per cent difference in Q1 2008 when the property market was abuzz with strong interest from foreign home buyers. The current 25.6 per cent price gap is the narrowest observed since condos were launched in Sentosa," said Colliers.
In absolute price quantum too, there are attractive deals to be found on Sentosa Cove. Seven condo units with floor areas of between 1,012 square feet and 1,216 square feet were transacted at $1.71 million to $1.90 million in the first nine months of this year. Of these, six units were in The Berth by the Cove, which was completed about seven years ago, while another was a unit in the three-year-old The Oceanfront@Sentosa Cove.
"The entry-level price band of $1.7-2 million is comparable and in some instances, even more favourable than the prices of some popular new mass-market homes on the mainland. For example, two units of similar sizes in the yet-to-be-completed 99-year Centro Residences in Ang Mo Kio sold at a median price of $2.1 million in the first nine months of 2013."
"Given that new mass-market condos are increasingly pushing towards the $1.7-$2 million price band, potential home buyers with a budget of $1.7 million and above should not overlook the opportunities in Sentosa Cove, where the condo segment appears to offer intrinsic value in terms of capital appreciation in the long run," said Colliers.
The property consulting group said Sentosa Cove condos can be considered for rental returns as well. Condos offering unrivalled proximity to the sea will remain rare given the controlled supply.
"And with the unique island-resort lifestyle offering that is likely to continue to appeal to the affluent, there is potential for the net rental yields of 2.8 per cent as of September this year to return or even exceed the historical high of 5.4 per cent achieved in Q4 2008 in the long run, when the major economies emerge from their doldrums," according to the White Paper.
As at end-September, there were still 412 units which developers have yet to release for sale in projects that have only been partially launched. These are Marina Collection, Seascape, Seven Palms Sentosa Cove, The Residences at W Singapore Sentosa Cove and Turquoise. In addition, among the units already rolled out, 63 units remained unsold.
However, would-be buyers are better off seeking Sentosa Cove condo units in completed projects in the resale market, from investors who acquired their properties in earlier years, Colliers pointed out.
"Owners who have made handsome profits may be ready to cash out at a level that may be a bargain compared with the prevailing asking prices of new apartments being offered by developers," said Colliers' director, Chia Siew Chuin.
In fact, of the seven entry-level condo units that changed hands in the $1.7 million-$2 million price band in the first nine months, four in The Berth by the Cove and one in The Oceanfront@Sentosa Cove were sold by their first owners who bought them between 2004 and 2006.
Developers generally remain upbeat about the long-term prospects for residences on Sentosa Cove given their rarity value and are holding back on sales launches hoping for a recovery in the high-end sector. Most of them also have strong holding power and are unlikely to slash prices to clear unsold inventory.
IOI and Ho Bee have decided to rent out units in their recently completed 302-unit Cape Royale instead of selling them.
Demand for homes on Sentosa Cove has whittled on the back of an exodus of foreign buyers following the Global Crisis, as well as the onslaught of seven rounds of property cooling measures and the Total Debt Servicing Ratio framework introduced in late June.
In January-September 2013, only 29 caveats were lodged for condo purchases on Sentosa Cove, compared with 70 for the whole of last year. These figures pale in comparison with the the record 497 caveats in 2006.
Foreigners including Singapore permanent residents made up 17, or 58.6 per cent, of the 29 caveats for January-September 2013. In 2006, they lodged 188 caveats, translating to 37.8 per cent market share.