Sentosa Cove bungalow market picks up

Activity in Sentosa Cove's bungalow market has picked up considerably in the last four to six weeks, following a relatively dry period following last December's introduction of the additional buyer's stamp duty (ABSD) targeting foreign buying of residential properties.

BT understands that owners have issued options to buyers for about a dozen homes in the past two months. The buyers are predominantly foreigners, mostly China nationals.

These bungalows are said to include two homes on Pearl Island, both of which sold at $2,200-plus per sq ft on land area. A unit on Paradise Island went for about $22 million or slightly over $2,380 psf based on land area of 9,236 sq ft; a property on Coral Island changed hands at $16.5 million or $1,743 psf on land area of 9,464 sq ft.

A seafronting property at Cove Grove boasting views of the Southern Islands is believed to have been sold for around $26 million, or $2,600 psf. This is in the neighbourhood of the one BT Weekend reported on Sept 15 as being sold for around $24 million or $2,470 psf.

The same edition of BT also reported two transactions on Cove Drive for units facing the waterway and Tanjong Golf Course at $15-plus million each. One was sold to a Myanmar citizen at $15.3 million or $2,202 psf.

Since then, BT has learnt of another purchase of a property a little further away on the same road, but also facing the waterway and golf course. The price is thought to be $16.8 million or $2,308 psf.

Homes on Sentosa Cove have 99-year leasehold tenure.

Market watchers attribute the recent revival in both viewings and transactions to a cocktail of factors - the stockmarket run-up, which in turn has boosted sentiment, QE3 and a narrowing in the bid-ask gap that kickstarted the first few deals in the latest resurgence.

A point to note, however, is that while there is anecdotal evidence of a string of options for bungalow purchases in the upscale waterfront housing district being granted in recent weeks, evidence of caveats is relatively scarce, as most of the options have yet to be exercised by the buyers.

Caveats were lodged for six Sentosa Cove bungalow purchases in the first half of this year, followed by two more since then. This compares with 25 caveats for the whole of last year.

Sources suggest some foreign buyers may have sought longer than the standard two-week option period with a view to securing Singapore permanent resident (PR) status in a bid to lower their stamp duty outlay.

In addition to the 3 per cent standard buyer's stamp duty payable for all property purchases in Singapore, including those by Singapore citizens, a Singapore PR pays a 3 per cent ABSD for his second and subsequent residential property purchases here.

For non-PR foreigners, a 10 per cent ABSD is payable on all residential property purchases.

Hence, if a foreigner obtains PR status, he would be able to "save" 7 per cent on ABSD, or $1.4 million on a $20 million bungalow purchase on Sentosa Cove, assuming he already owns an existing non-landed residential property here.

But if this PR does not own any other existing residential property here, he does not have to pay ABSD at all - translating to a "saving" of 10 per cent or $2 million.

Word on the Cove is that some foreign buyers have been granted long option periods ranging from six weeks to three months, or even longer. In exchange for this, owners would typically demand a higher option fee, say 5 to 10 per cent of the property price, compared with one per cent in a standard deal.

Typically, a buyer in the resale market who fails to exercise an option would have to forfeit the option deposit.

Some owners who have entered into such deals on Sentosa Cove are keeping their fingers crossed that the options will be exercised.

Market watchers note that the Singapore authorities have tightened criteria for issuing PR status to high-net-worth foreigners.

On unit land price, the highest price achieved this year is $2,787 psf in May, for a seafronting property along Cove Drive.

The record price for a bungalow in Sentosa Cove was set in October 2010, by a seafronting property on Ocean Drive facing Singapore's city container ports. It transacted at $2,989 psf. Among waterway fronting bungalows, the highest price achieved was in September last year - $2,613 psf for a property on Cove Drive.

The recent run-up in deals and QE3 have boosted confidence among some owners, who have started to raise asking prices.

Source: Business Times – 6 October 2012