Price gap between GCBs and Sentosa Cove bungalows narrows further

T he doubling of the additional buyer’s stamp duty (ABSD), from 30% to 60%, for foreign buyers purchasing residential property in Singapore has taken a toll on the sales volume of luxury private homes in exclusive enclaves such as Sentosa Cove. The measure came into effect on April 27.

“We observed that transactions of non-landed homes and detached houses in Sentosa Cove were rather active in the first three months of this year, based on caveat data provided by URA. However, transactions slowed down in April and the pullback accelerated further in May, June and July,” says Han Huan Mei, director of research at List Sotheby’s International Realty.

In February, 13 caveats for apartments in Sentosa Cove were lodged, while the sales of two detached houses were also recorded. This was followed by 11 non-landed transactions and three detached houses changing hands in March.

However, a knee-jerk reaction followed the April property cooling measures, which saw condo transactions fall to eight in April, and then to four in May. Likewise, only one landed purchase each was caveated in April and May.

“This reduced sales momentum could be attributed — partly, if not entirely — to the hike in ABSD,” says Han.

Sentosa Cove is the only location in Singapore where foreigners are eligible to purchase landed homes. In addition, Sentosa Cove boasts various beachfront properties and marina-facing homes and apartments. It is arguably the only central location in Singapore that offers this type of lifestyle environment.

“We expect the buying mood for bungalows at Sentosa Cove to remain muted for the rest of 2023,” says Han. “For any deal to be struck, sellers may have to lower their price expectations to help ease the burden of the ABSD rate that buyers will have to bear, especially if they are selling to foreigners.”

However, some foreign buyers may have sensed an opportunity in Sentosa Cove in recent weeks to scoop up deals on the market, says Han. She notes that three foreigners purchased three apartments in June, while four Singapore permanent residents closed deals on four apartments in July.

As prices of landed and luxury apartments on the mainland have increased in recent years, the average price gap between Sentosa Cove bungalows and Good Class Bungalows (GCBs) narrowed from approximately $11.65 million in 2021 to $8.20 million in 2022. Caveated transactions over the first seven months of 2023 indicate that the price gap between mainland GCBs and Sentosa Cove bungalows has narrowed further this year to $5.37 million, according to research by List Sotheby’s International Realty.

“Considering that bungalows at Sentosa Cove are all 99-year leasehold properties, whereas nearly all GCBs are freehold, the former are generally priced lower than GCBs. But there is a premium attached to the types of sea views which only the bungalows at Sentosa Cove get to enjoy. These are the two main factors that draw investors to Sentosa Cove,” says Han.

She foresees a pick-up in sales next year at Sentosa Cove, buoyed by a fresh intake of newly minted permanent residents and citizens who are keen to restart their previously disrupted acquisition plans. “It is likely that in 2024, prices will be similar to this year with the exception of bungalows with land areas of more than 18,000 sq ft. Demand for these spacious homes will be high and they are likely to fetch higher prices,” she says.