A decade ago, when he first purchased a seafront bungalow plot in Sentosa Cove, the Indonesian businessman decided that he was going to spare no expense in building a holiday home for his family. The house has titanium clad- ding on the exterior walls, and premium-grade Statuario Italian marble flooring in the family and dining rooms, with the marble slabs book-matched to create a “butterfly design” in the living room. The home lift is lined with Blue Monterey marble, while the feature wall is of Galliano natural stone. All the bathrooms have full-height marble slab walls.

The four-bedroom, double-storey bungalow sits on a 10,754 sq ft, 99-year leasehold plot with a built-up area of 8,655 sq ft. It comes with a basement and a mineral water swimming pool measuring eight by three metres, equipped with underwater sound system. The property has direct views of the sea and the Singapore city skyline.

The master bedroom has a soaring ceiling height of 7.8m and overlooks the sea. The main attraction is the customised walkin wardrobe, which occupies about 1,000 sq ft of space in the master bedroom and holds not just the wife’s clothes, but also her collection of some 120 Hermès handbags. There’s also a concealed shoe wardrobe near the entrance hall on the first level that can fit 200 pairs of shoes. Both the walk-in and shoe wardrobes have a biometric security system.

The wife, who only wants to be known as Linda, is an avid Hermès fan —  from the brand’s handbags and accessories, right down to cushion covers and dishes. Three years ago, she was one of the VIP guests at a private dinner hosted by SC Global’s Simon Cheong at the ultra-luxury condo The Marque on Paterson Hill, where one of the units was entirely furnished by Hermès. “It was very nice,” she says.

Linda and her husband were frequently on the guest list of luxury condo private previews during the last property boom — including The Orchard Residences, Boulevard Vue and St Regis Residences.

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Before they decided to purchase a seafront site to build their own bungalow a decade ago, the family had lived in Ardmore Park condo, where units start from 2,885 sq ft, and is still used as a benchmark for luxury condo prices in the area.

‘Value buy seafront home’

Typical of most overseas homeowners, the Indonesian family has been using their Sentosa Cove bungalow as a vacation home, staying only several months each year. Even then, the dry kitchen is fitted with top-end Poggenpohl cabinets and Miele appliances, while the wet kitchen has Wolf appliances and two SubZero refrigerators.

All in, the owner is said to have spent $9 million on the design and construction of the house, including materials and fitting out the interiors. The design architect for the house was renowned architectural firm, Eco-Id Architects. “It’s very normal for some of these ultra-high-net-worth individuals to spend $8 million to $9 million, or at least $1,000 psf, just on the construction of their bungalow in Sentosa Cove,” says Steve Tay, associate director of Newsman Realty, who specialises in marketing luxury homes in the waterfront residential enclave.

However, as the family will be spending even less time in Singapore, given that their older children are moving abroad for their further education, the owner is now contemplating putting the house on the market. Two years ago, the property in Ocean Drive was valued at $32 million or $2,976 psf. The indicative selling price tag for the house is now $25.8 million ($2,399 psf).

The asking price of $2,399 psf is “a value buy”, according to Tay. This is because the house next door, which sits on a slightly smaller land parcel of 10,107 sq ft, changed hands for $32.5 million, or a record-smashing $3,214 psf in October 2012. Another bungalow further down Ocean Drive, which sits on 6,706 sq ft of land, was sold for $17 million ($2,535 psf) in November 2012.

Meanwhile, the bungalows at Lakeshore View in Sentosa Cove, which are said to have “triple views” — of the golf course, the lake and the sea — saw transaction prices of $26 million ($2,922 psf) and $24.8 million ($2,522 psf) in 2013.

Falling transactions

Transaction volume, however, has dropped significantly since the government introduced a series of property cooling measures. This was most noticeable after the hike in Additional Buyer’s Stamp Duty (ABSD) to 15% for foreign buyers in January 2013, and the increase in Seller’s Stamp Duty (SSD), in January 2011, to a tiered system of 16%, 12%, 8% and 4% for properties sold within the first to fourth years of purchase.

Bungalow transaction volume in Sentosa Cove hit a peak of 54 units in 2010, before halving to 24 and 25 units respectively over the next two years. It slipped to 18 in 2013, before collapsing to just three last year (see table).

“We have seen some homeowners in Sentosa Cove adjusting their selling prices, and that could account for all three transactions in 2014 taking place in the second half of the year,” notes Tay.

Average transaction prices of bungalows in Sentosa Cove dropped about 21% from $2,123 psf in 2013 to $1,676 psf in 2014. However, the lower price psf achieved last year could also be partly attributed to the fact that most of the bungalows sold were sitting on smaller land areas of 7,341 sq ft to 8,654 sq ft, and many did not have direct sea views, says Desmond Sim, head of CBRE Research for Singapore and South East Asia. In comparison, many of the higher priced bungalows sold in 2012 and 2013 sat on plots above 11,000 sq ft and had sea frontage, he explains.

In the first three months of 2015, there was only one bungalow transaction in Sentosa Cove: The unit on Treasure Island, sitting on a 9,268 sq ft land site fronting a waterway, changed hands for $22 million ($2,374 psf).

‘Using condo prices as proxy’

While more investor-owners of bungalows in Sentosa Cove are looking to exit the market today as they search for better investment returns elsewhere, they are not prepared to offer their properties at distressed prices, notes Tay. Some are also looking to sell because they are spending less time in Singapore as their businesses have moved elsewhere.

The dearth of bungalow transactions in Sentosa Cove has distorted price trends, says CBRE’s Sim. Consequently, some potential investors are using the average transaction prices of condos as a proxy, explains Samuel Eyo, managing director of Singapore Christie’s Homes. “But Sentosa Cove bungalow prices are based on land, while that of condos are based on floor area,” Eyo says. “This, however, has not stopped some bargain hunters from using the distressed prices achieved at condos as a benchmark for bungalow prices.”

The result has been low-ball offers for bungalows, that widened the price expectations between sellers and buyers even further.

Eyo cites the example of a seafront bungalow on Ocean Drive he is currently marketing. The owner is asking for $25 million ($3,200 psf). Since January, there have been three viewings and two offers. Both were at a 50% discount to the asking price, and were rebuffed. Some of the 99-year leasehold condo units changed hands in the second half of last year at distressed prices. Most recently, a 2,626 sq ft, four-bedroom unit at The Coast was sold in January for $3.125 million ($1,190 psf), which was 28% below the original purchase price of $4.34 million ($1,653 psf) in November 2007.

Meanwhile, a 2,777 sq ft, four-bedroom unit at another condo, Turquoise, changed hands for $4.55 million ($1,638 psf) at the start of the year. This was 37.4% below the original purchase price of $7.27 million ($2,616 psf) in November 2007.

Property agents attribute the marked-down price to two earlier transactions of units in Turquoise last July. Both were mortgagee sales of identical 2,777 sq ft units on the second and third floors of the condo. One unit was sold for $3.98 million ($1,397 psf) and the other, $4.03 million ($1,450 psf). The prices represented a precipitous drop of 45% and 43% from the original purchase prices of $7.1 mil- lion ($2,558 psf) and $7.09 million ($2,553 psf), respectively, seven years ago.

On March 26, a penthouse at the luxury condo Seascape in Sentosa Cove was put up for auction by JLL. The 4,133 sq ft penthouse has four bedrooms and a study, and an indicative price of $9 million ($2,178 psf). There has been strong interest from both investors and owner occupiers as it is a mortgagee sale, notes Mok Sze Sze, head of auction at JLL. “However, potential buyers remain price sensitive,” she adds.

The opening price of $9 million for the pent- house at Seascape is 18% below the previous owner’s purchase price of $11 million ($2,661 psf) four years ago. Located in the South Cove, all 151 units in the luxury condo Seascape by developer Ho Bee Land and IOI Group have direct sea views.

Different dynamics

Property consultants don’t expect bungalows in Sentosa Cove to see the same level of pain that the condominiums have seen in terms of distressed sales. Most of the bungalow owners are entrepreneurs and tycoons, many of whom own multiple homes, says Tay. “Unlike the condo owners, they are less sensitive to loan restrictions or rising interest costs. And they have the ability to hold and ride out short-term market fluctuations.” Bungalow prices are well above $10 million, while condominiums are from $2 million.

There are also significant differences in the supply and demand dynamics. In the 117ha Sentosa Cove, there are an estimated 2,800 condo units, compared to just 320 bungalow plots. “While there are few comparables for the waterfront bungalows in Sentosa Cove, the condos face stiffer competition from luxury condos on the mainland, which may have similar attributes, including water views,” says Tay.

Even though there are no new condo sites being sold and, therefore, no future new supply in Sentosa Cove, many of the developers of completed condo projects are still sitting on unsold inventory. For instance, the 302-unit Cape Royale was completed in August 2013 by developer Ho Bee Land and IOI Group. But the developer is still holding on to all the units, which are only being offered for lease. There are still unsold units at Seascape, the 91-unit Turquoise, the 124-unit Marina Collection and the 228-unit The Residences at W Singapore, Sentosa Cove.

The silver lining is that luxury condos in Sentosa Cove are not subject to the conditions of the Qualifying Certificate, which require the developer to sell all the units within two years of completion, failing which they have to pay an extension charge. Developers of condo projects in Sentosa Cove, therefore, do not face the same selling pressure as those on the mainland, which are subject to the QC conditions. “So, the developers of condos in Sentosa Cove can take their time to sell their units, and in the meantime, lease them out,” says Jason Tan, executive director of JTResi, a boutique luxury property specialist.

While there are more Singaporean and foreign buyers looking at waterfront homes in Sentosa Cove, “what’s clear is that owners looking to sell their homes today have to be prepared to lower their prices”, Eyo notes.

However, Tay reckons the rarity of waterfront land plots in Sentosa Cove will ensure that prices of bungalows hold better than that of condos. “This is a buying opportunity for genuine home buyers,” he adds.

This article appeared in the City & Country of Issue 670 (Mar 30) of The Edge Singapore.

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