Sunset over Sentosa Cove

Introduction

The Sentosa Cove housing market was introduced in 2003 to great fanfare. Located at the southeastern coast of Sentosa Island, it was modelled after Port Grimaud in the south of France.

The Sentosa planners designed Sentosa Cove as a luxury waterfront district to feature a resort lifestyle with private marina berths and consisting of a mix of landed housing, low-rise apartments, and condominium developments.

Its status as a luxury housing district was enhanced when the URA included it as part of the Core Central Region, which represents the high-end housing market segment in Singapore.

However, as an investment destination, the Sentosa Cove real estate market has seen better days. In this research study, the profitability of Sentosa Cove residential real estate transactions will be examined before and after the 2023 property market cooling measures.

Objective of the study

The purpose of this research study is to examine how profitable are the Sentosa Cove residential real estate transacted by the individual owners before and after the implementation of a major round of property market cooling measures, such as the one in late April 2023.

The residential real estates at Sentosa Cove can be broadly divided into landed properties, and non-landed properties, namely condominiums. The study will analyse the profitability of these two market segments before and after the 2023 cooling measures.

Methodology of research study

The study will utilise the repeated sale analysis of the Sentosa Cove residential secondary market property transactions. The capital gains from the property transactions excludes property taxes, all types of stamp duties, lawyers’ fees and property agents’ commission.

The resale transactions are divided into 2 equal time periods of 3 years 2 months each for comparison purpose.

Period A is before the introduction of the property market cooling measures at the end of April 2023. Period A is from March 2020 to April 2023, inclusive of both months.

Period B is the time after the introduction of the April 2023 property cooling measures. It starts from May 2023 to June 2026, inclusive of both months.

Overall results

Some of the results from this study illustrates the profitability of Sentosa Cove real estate assets that are different from conventional expectations.

Result number 1: There are more unprofitable resale deals of Sentosa Cove properties in the past 6 years than profitable ones. Almost two-third of the resale deals are unprofitable.

Result number 2: The proportion of unprofitable resale deals of Sentosa Cove properties has risen from 62.8% before the April 2023 property curbs to 64.5% after the curbs were introduced.

Result number 3: After the April 2023 property curbs, the average losses suffered by sellers at $1.28 million is almost double the average profit of $655,590.

Result number 4: After the April 2023 property cooling measures, the average size of the profit from the sale of Sentosa Cove housing units has fallen to $655,590, which is less than half of the average profit of $1,745,530 before the April 2023 property curbs.

Overall, the investment performance of Sentosa Cove housing is not looking good for the property owners.

Below is the summary of the profitability analysis results.

Table 1: Sentosa Cove profitability summary, Before April 2023 property curbs, Landed housing and condominium transactions combined

Period A: Before April 2023 curbs	Proportion of transactions	Average capital gains
Profitable resale	36.2%	$1,745,530
Break-even resale	1.0%	$0
Unprofitable resale	62.8%	-$1,557,287
Total	100.0%

Source: Mogul.sg Research

Table 2: Sentosa Cove profitability summary, After April 2023 property curbs, Landed housing and condominium transactions combined

Period B: After Apr-2023 curbs	Proportion of transactions	Average capital gains
Profitable resale	35.5%	$655,590
Break-even resale	0.0%
Unprofitable resale	64.5%	-$1,281,635
Total	100.0%

Source: Mogul.sg Research

Sentosa Cove condominium market profitability analysis

Based on the analysis of available data, the sellers of Sentosa Cove resale condominium units fare worse than the sellers of landed housing units as the number of unprofitable resale condominium transactions outnumber the profitable ones by a ratio of two-to-one. Furthermore, the average size of the capital losses is bigger than the average amount of the capital gains.

In Period A (before the April 2023 property market curbs), there were 51 profitable condominium resale transaction in Sentosa Cove and 102 unprofitable ones. There was one break-even resale transaction. Only 33.1% or one-third of the condominium resale transaction was profitable in Period A. (See Table 3)

The average quantum of the losses is also almost double the average quantum of the profit.

The average profit of the profitable condominium resale transactions in Period A was $552,518, while the average losses of the unprofitable condominium resale transactions was $1,080,799.

Table 3: Sentosa Cove condominium profitability analysis, Before April 2023 market curbs

Period A: Before April 2023 curbs	Proportion of transactions	Average profit of condo resale transactions
Profitable resale	33.1%	$552,518
Break-even resale	0.6%	$0
Unprofitable resale	66.2%	-$1,080,799
Total	100.0%

Source: Mogul.sg Research

The resale market did not improve significantly for the condominium unit owners in Period B which is the period after the April 2023 property market cooling measures. Although the proportion of profitable condominium transactions increased marginally from 33.1% in Period A to 34.5% in Period B, the number of profitable condominium transaction fell by 21.6% to 40 units, as shown in Table 4.

Table 4: Sentosa Cove condominium profitability analysis, After April 2023 market curbs

Period B: After April 2023 curbs	Proportion of transactions	Average profit of condo resale transactions
Profitable resale	34.5%	$404,277
Break-even resale	0.0%
Unprofitable resale	65.5%	-$1,165,564
Total	100.0%

Source: Mogul.sg Research

Furthermore, the gap between the average amount of capital gains and capital loss widen in Period B. In Period A, the average losses of $1,08 million was 1.96 times bigger than the average profit of $552,518.

By comparison, the average capital loss in Period B was $1,165,564, which was 2.9 times larger than the average profit of $404,277.

Sentosa Cove landed housing market profitability analysis

The Sentosa Cove landed housing market is smaller than the condominium market. In the two periods examined in this study, landed housing consists of 16.4% of the property transactions. The remaining 83.6% of the transactions were those of condominium units.

In Period A, the number of profitable and unprofitable landed housing transactions in Sentosa Cove were quite evenly distributed, with sellers of 46.7% of the transacted houses walking away with a profit, while 51.1% of the landed property sellers suffered a capital loss.

Table 5: Sentosa Cove landed housing profitability analysis, Before April 2023 market curbs

Period A: Before April 2023 property curbs	Proportion of transactions	Average profit of transacted resale houses
Profitable resale	46.7%	$4,642,844
Break-even resale	2.2%	$0
Unprofitable resale	51.1%	-$3,670,410
Total	100.0%

Source: Mogul.sg Research

Unlike the Sentosa Cove condominium resale transactions where the average size of the capital losses are greater than the average size of the profits, the reverse is observed in the landed housing segment. The average capital gain of $4.6 million for landed housing resale transactions is 26% more than the average quantum of $3.67 million capital losses for landed homes in Period A.

The number of Sentosa Cove landed homes transactions in Period B fell off a cliff as it contracted by 82.2% compared to the 45 landed units sold in Period A. This is mainly due to the government raising the Additional Buyer’s Stamp Duty (ABSD) for foreign buyers of private residential properties from 30% to 60% of the real estate price in April 2023.

There were only eight landed housing transactions recorded in Period B. The numbers of profitable and unprofitable landed housing transaction were evenly split, where four of the landed housing transactions were profitable while a similar number of landed homes were sold at a loss for the seller.

A second notable difference between the two Periods was the average capital gain of landed homes sold in Period B was smaller than the that in the first period. After the introduction of the April 2023 property curbs, the average capital gain from selling Sentosa Cove landed homes fell by 31.8% to $3.17 million.

Table 6: Sentosa Cove landed housing profitability analysis, After April 2023 market curbs

Period B: After April 2023 property curbs	Proportion of transactions	Average profit of transacted resale houses
Profitable resale	50.0%	$3,168,718
Break-even resale	0.0%
Unprofitable resale	50.0%	-$3,487,000
Total	100.0%

Source: Mogul.sg Research

The gap between the average quantum of capital gains and losses were also closer in Period B and in the preceding period.

Another difference from Period A was that in Period B, the gap between profit and loss quantum was closer. The difference between the average profit of $3.17 million for landed property transactions was closer to the average capital loss of $3.49 million.

Factors contributing to the decline in the Sentosa Cove housing market

There are several factors contributing to the decline in the Sentosa Cove housing market as an investment destination and the real estate on the resort island as store of wealth.

First of all, there is a change in government direction and policy. When the Sentosa Cove housing sub-market was created in the early 2000s, real estate as seen as one of the assets to draw foreign investors and HNWI to reside in Singapore. It is the only part of Singapore where foreigners could buy landed houses more easily than on mainland Singapore.

When the government doubled the Additional Buyer’s Stamp Duty (ABSD) for foreign buyers of local residential properties from 30% to 60% in April 2023, it is a signal that the government no longer considers private housing as a necessary asset to lure foreigners to Singapore. This was also a response to the public concerns that foreign hot money coming to the local housing market could drive up property prices and worsen housing affordability.

Secondly, although Sentosa Cove is part of the CCR, it is not as accessible by road or public transport compared to most of the other locations in the Central Region. In Singapore, real estate value is enhanced by the easy accessibility public transport, especially to a MRT station. It is highly unlikely that the government would ever build a MRT line to and a station at Sentosa Cove due to the complexity and forbidding costs.

Thirdly, there is an absence of new and uncompleted residential project launches in Sentosa Cove in the past few years. New residential project launches draw attention to the location and the secondary market around the new housing development.

The most recent residential launch at Sentosa Cove was in April 2024 when City Developments Limited released the remaining unsold dwelling units in The Residences at W Singapore Sentosa Cove for sale to the public. However, this is actually a relaunch of the 228-unit residential project as it was launched earlier in March 2010 at eye-watering prices ranging from $2,500 to $3,000 psf. The buyers’ response to the initial launch in 2010 was lacklustre with reported sales of only 20 units.

The condominium development was completed in April 2011. Hence, the buyers in the April 2024 relaunch could not enjoy progressive payment offered by developers of projects under development. As a result, the homebuyers were purchasing a 13-year-old property without the benefit of the progressive payment scheme. It is similar to buying a resale property.

In an emblematic twist, City Developments relaunched The Residences at W Singapore Sentosa Cove in 2024 at an average price of $1,780 psf, which is 36% lower than the $2,793 psf average transacted prices of the units sold in the initial 2010 launch.

The fourth factor is that all the residential properties at Sentosa Cove are 99-year leasehold properties built on land that were sold by the government. The Sentosa Cove property values would gradually depreciate as the lease of the land tenures decay over time.

Last but not least, the properties at Sentosa Cove are built near the seacoast. Therefore, they face great risks from climate change such as rising sea level and more violent storms. In addition, the salty sea breeze that residents enjoy also heighten the corrosion of metal fittings and fixtures in the properties leading to greater wear and tear of the real estate assets.

Conclusion

The probability of capital losses facing the Sentosa Cove property owners is higher than many other parts of Singapore. Hence, Sentosa Cove residential properties is a high-risk investment and should not be considered a good store of wealth compared to real estate in other parts of Singapore.

For the owners of landed houses in the Sentosa Cove, the probability of whether the sale house could be profitable or not is similar to that of a coin toss. In this respect, the landed housing segment fares slightly better than the condominium market.