Retaining its shine

SENTOSA, in Malay, means tranquility. Its history, however, is anything but. Formerly known - perhaps morbidly - as Pulau Belakang Mati (Island of death from behind), it was at various times a fishing village, the site of a British artillery detachment, and a camp for prisoners of war during the Japanese Occupation in the mid-1940s.

The roots of its present reputation as a resort can be traced to Albert Winsemius, a Dutch development economist and adviser to the Singapore government, who recommended that Sentosa be built to support tourism as a key sector of Singapore's economy. Interestingly, building a casino on Sentosa was already a considered possibility in the mid to late '60s, but it did not materialise.

Nevertheless, under the then Singapore Tourist Promotion Board (STPB), hotels, beaches and a host of attractions would be built to turn Sentosa into a resort destination for locals and tourists alike.

Today's residential enclave, Sentosa Cove, was originally conceived in 1996 not only to take advantage of its resort status, but also on the basis that a permanent population on the island would reduce reliance on tourists for revenue. However, the Asian Financial Crisis in 1997 derailed these development plans. Eventually, one of its first projects, One°15 Marina, opened in 1999, and the sale of residential land sites was launched in 2003, continuing over the next five years.

Sentosa Cove was created by land reclamation, merging reclaimed land mass with a small island known as Buran Darat. The Cove now includes five artificial islands called Coral Island, Paradise Island, Treasure Island, Sandy Island and Pearl Island, all of which have been reserved for bungalow development.

Today, Sentosa Cove is substantially completed, boasting a luxury hotel, W Singapore, and a lifestyle village known as Quayside Isle, home to more than 5,000 people residing in over 2,000 homes. There are also 10 luxury condominiums with nautical-themed or exotic resort names, such as The Oceanfront, Seascape, The Azure, The Coast and the Berth by the Cove.

Allure of the Cove

Sentosa Cove was modelled after Port Grimaud, a seaside town along the famous French Riviera. The master plan for the Cove envisaged a 117-hectare enclave for a largely residential development, and some lifestyle-resort elements. Residential developments can be found in two main areas: the northern precinct and southern precinct. Inland waterways punctuate many parts of the site, allowing property owners, especially of the larger villas, the space to berth their boats. To christen Sentosa Cove as the Monte Carlo of Singapore may be an overstatement, but some of the properties here boast mesmerising views of the open sea.

One unique aspect of Sentosa Cove is that foreigners are broadly permitted to purchase landed properties there, unlike on the "mainland". There is an application process to be followed: the property must be owner occupied, the foreigner can only own one such "restricted" property, and he or she must dispose of any other such "restricted" property if they successfully apply for any purchase of Sentosa Cove landed property.

This relaxation of foreign-ownership restrictions, coupled with beautiful sea views, a resort atmosphere and largely lifestyle elements, have drawn foreigners to own homes on the island. Bungalows and villas in particular also showcase a huge variety of creative home exteriors, eclectic visual spectacles that greet visitors to the Cove.

How fares the Sentosa Cove market?

It is no surprise that as a sub-market, Sentosa has drawn strong interest from both developers and buyers, with no other area like it anywhere in Singapore. The price performance of non-landed homes in Sentosa since its inception in 2004 indicates its attractiveness, especially when benchmarked against its closest reference set - the Harbourfront cluster, comprising the three Keppel projects of Corals, Reflections, and The Caribbean. These projects share similar resort and sea-facing characteristics as the condominiums on Sentosa Cove, also enjoying proximity to nearby Keppel Marina.

Average Sentosa non-landed property prices tripled over seven years from S$766 psf in 2004 to over S$2,300 psf in 2010 (Figure 1), despite a blip in 2009 owing to the Global Financial Crisis (GFC). Indeed, prices consistently hovered above the Harbourfront cluster prices till 2013, when the force of the full set of government cooling measures culminating in the Total Debt Servicing Ratio was brought to bear on the market. Except for 2016, Sentosa prices have lagged behind Harbourfront.

While there is no parallel reference data set for landed properties in the Harbourfront cluster, the price pattern is similar to the non-landed segment (Figure 2), although the peak at S$2,240 psf (over land area) seems to have occurred prior to the GFC in 2008 and has never been breached since. However, one caveat is that landed properties have a wider berth in terms of plot size, built-in area as well as finishings and fittings, indicating a tougher precision on figures. Nevertheless, the trend is evident of a price decline since 2013.

Losing its shine? Not so soon...

Prima facie, it seems that the best years for Sentosa Cove properties have passed. Knight Frank Research shows that except for 2006, the Harbourfront cluster has drawn more buyers for non-landed homes than Sentosa Cove. Perhaps, the Harbourfront story is more compelling now - resort lifestyle, sea views, a stone's throw away from Sentosa, proximity to an MRT station, and all the retail and food and beverage facilities one could need at Vivocity.

More recently, there have been reports of unlit condominiums in the Cove during nightfall, suggesting unsold or possibly, unoccupied units. Further reports highlighting hefty price discounts, distress sales and loss-making deals in recent times have also cast a pall on the sub-market.

However, there has been a clear uptick in buying volumes, albeit nowhere near previous levels (Figure 3) - a trend mirrored by the landed segment (Figure 4). Volume growth often presages price upturns, although the gradual pace and relatively small volumes imply that it may be some time before definite price rises for Cove properties are seen, both for the non-landed and landed segments.

The fact remains that despite the intermittent traffic congestion, limited accessibility, unoccupied units and reportedly high-profile losses on some transactions, there is nothing quite like Sentosa Cove in Singapore. Like the rest of the overall residential market, property sales volume and prices will likely trend upwards moving forward, although the trajectory will be gradual. W