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While they expect prices to continue rising, they say it remains to be seen if island’s homes are of good value
RESORT living in Singapore has caught on like wildfire, with land prices for Sentosa Cove doubling since the island’s first land sale in 2003.

The strong demand is expected to continue with buyers attracted to the exclusivity and waterfront living offered by the island, say property experts.

But given the rapid increase of prices at Sentosa Cove in the last two years, are homes there still good investments or are they already overpriced?

For now, prices are still on the rise: The Sunday Times understands that a bungalow plot sold on Oct 11 fetched a record price of more than $1,100 per sq ft (psf), topping the previous high of $1,093 psf set in August. This is more than double the top price of $456 psf fetched for the first batch of Sentosa Cove bungalow sites in 2003.

Each new residential project launched at Sentosa Cove is also setting new benchmark prices.

Boutique developer Ho Bee is selling the island’s latest condominium, The Coast, at an average price of about $1,575 psf - also double the $768 psf price at which Ho Bee launched Sentosa Cove’s first condominium, The Berth, in 2004.

More land plots and homes are expected to be up for sale on Sentosa in the next few years, including new developments by Malaysia’s YTL Corp and Indonesia’s Lippo Group.

But while market watchers expect prices on the island to keep increasing over the next year at least, they caution that Sentosa Cove is an ‘untested market’ for investors.

‘If you ask me whether I think Sentosa is good value, I would ask you what you think is the expected return,’ said Ms Regina Lim, a property research analyst at investment bank UBS.

‘Right now it’s impossible to tell because none of the homes are completed and getting rentals.’

She added: ‘I think developers have been able to price their unit sales at about 80 per cent more than six months ago, basically because there is no rental yet to justify either way.’

Mr Nicholas Mak, director of research and consultancy at Knight Frank, also noted that ‘people have not really started living in Sentosa Cove yet’.

‘They have not started experiencing traffic jams, which may happen because there’s only a two-lane road leading in and it’s very narrow.’

He pointed out that Sentosa Cove dwellers will have to go back to the mainland for everyday conveniences such as groceries and shopping.

‘As a weekend resort home, it’s fine. As a permanent home, I think it will face challenges,’ he said.

Another reason why Sentosa Cove may not be an attractive long-term investment is that all the land plots there have leases of 99 years.

‘Looking at the experience of other leasehold condos on the mainland, prices will decline as the condo ages, unlike for freehold,’ said Mr Mak. ‘Will the same thing happen to the properties on Sentosa? No one knows, because it’s really an untested market.’

He added that even the lauded feature of waterfront living may work against Sentosa Cove homes, as ‘the wear and tear suffered by some of these units may be greater, because they are more exposed to the sea and the elements’.

But for now, consultants agree that Sentosa Cove still presents an appealing investment option.

Buyers of Sentosa Cove homes are probably hoping for capital gains - which means re-selling the units at a profit - rather than banking on rental returns, said Mr Mak.

‘In the short term, it is still a good bet, if you buy now and sell before the project is completed.’

He expects prices on the island to rise by another 10 to 15 per cent over the next year.

‘Land prices have doubled, no doubt, but your risks have dropped by about 80 per cent,’ said Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

This is because when the first condo was launched on the island, it was ’six months after Sars, no one was confident about the property market or the economy, and there was no mention of even one casino, much less two’.

Now, with a $5 billion integrated resort to come up in Sentosa, the island presents ‘a good investment for play-safe investors’, said Mr Ku.

He predicts that condos in Sentosa Cove can hit $2,000 psf by next year, and may even reach $2,500 psf in the future, comparable to current prices at the prime Ardmore Park area.

Source : Sunday Times - 22 Oct 2006