REACTIONS TO NEW PROPERTY MEASURES

Sentosa Cove property may be impacted: analysts
By UMA SHANKARI

(SINGAPORE) The residential market in Sentosa Cove - where foreigners and corporations accounted for 46 per cent of home purchases in the first 11 months of 2011 - could be hit especially hard by the latest round of cooling measures, say analysts.


With properties there going usually in excess of $15 million, the stamp duty increases for those segments would now work out to close to $2 million - which buyers might be unwilling to swallow, said International Property Advisor chief executive Ku Swee Yong.

According to data compiled by SLP International, the proportion of homes in Sentosa Cove bought by foreigners rose to 41 per cent in the period from January to November 2011. And corporations picked up another 5 per cent of all homes sold, according to the firm's analysis of caveat data from URA Realis.

This is a jump when compared to foreigners' and corporations' share of 33 per cent from January 2009 to December 2010.

Sentosa Cove is the only part of Singapore where foreigners don't need to be permanent residents (PRs) to buy landed homes, so the residential enclave has typically been popular with that segment of buyers.

Their share of purchases grew even as overall transaction volume dipped. And now, volumes could fall even further as foreigners hold off on buying in the wake of new measures - which include an additional buyer's stamp duty of 10 per cent for foreigners and corporations, on top of the existing buyer's stamp duty of up to 3 per cent.

'I think the sales in Sentosa Cove were already slowing recently, in line with the rest of the market,' said DTZ's chief operating officer for South-east Asia, Ong Choon Fah. 'And now, things will be even slower for a while.'

Analysts estimate that about 60 per cent of the units in the high-end residential enclave are owned by foreigners.

And while a fair number of these foreigners are owner occupiers, there are also a fair number of investors who will now face a shrinking pool of buyers when they try to re-sell their properties.

Analysts noted that the 'intent' of the latest round of measures seems to be to limit foreign purchases.

'While the impact from higher entry cost is broad-based, we see more heightened risk in the prime segment (such as in Sentosa) where foreigners and PRs account for some 44 per cent of all sales (up from 20 per cent in Q1 2009),' said Goldman Sachs analysts Paul Lian and June Zhu in a note yesterday.

But DTZ's Mrs Ong noted that the limited supply of homes in Sentosa Cove - just around 2,400 - works in favour of the micro-market there.

And developers and investors who are looking to sell their units on the island generally have good holding power, she added. 'Sellers are likely to adopt a wait and see attitude, rather than offload their properties through fire sales.'

Source: Business Times - 9 December 2011