Can you make money from Sentosa property? Here's what we can learn from the profitable ones

Can you make money from Sentosa property? Here's what we can learn from the profitable ones
PHOTO: Stackedhomes

With prices at the recent The Residences at W slashed by over 40 per cent, there has been much talk and excitement about Sentosa properties again.

But frankly for anyone looking at buying in Sentosa, they fill a very clear niche: they are luxury lifestyle homes for owners to indulge in, first and foremost. Investment purposes are mostly secondary. If you just want to make money, there are condos elsewhere with better yields, resale track records, and lower cash outlays.

So we figured given the poor performance of Sentosa properties, it would be interesting to look at the rare ones that have been profitable and what we can learn. Here's an overview:

Top overall performers

Project No of Buy/Sell Transactions Average Gains Average Returns Average annualised returns Average holding period (years)
THE BERTH BY THE COVE 202 $605,634 39.8per cent 24.1per cent 5.5
THE AZURE 118 $676,736 36.3per cent 25.7per cent 4.3
THE OCEANFRONT @ SENTOSA COVE 276 $389,943 15.0per cent 20.6per cent 5.4
THE COAST AT SENTOSA COVE 171 $235,938 7.1per cent 13.6per cent 6.5

Profitable (on average) condos at Sentosa Cove since 2004

The Berth by the Cove is one of the more recognisable names at Sentosa Cove. Besides having an advantage from strong sub sales (see below), the Berth had a first-mover advantage: this was the first condo at Sentosa Cove. Plus, at the time of its launch, it had the novelty of being one of the first residential projects to offer berthing for yachts. 

The Azure is the only one that's come out ahead of The Berth, and this was the second condo right after it. It also saw strong sub sales, as we cover below. But in fairness, The Azure is one of the cove's most iconic projects.

The developer capitalised on the unique land parcel which was on the absolute easternmost tip of Sentosa: the shoreline forms the perimeter of this condo. Because of this, the Azure is said to have the best beach view in Singapore (270-degree panoramic view), with exceptionally large patios and balcony spaces that open up to it. 

As some of these condos were built before 2010, there's a possibility the highest profits were in sub sales. 

Sellers Stamp Duty (SSD) was introduced only in 2010, so there was no penalty for "flipping" a Sentosa Cove condo in the years before that. Some of the better profits at Sentosa Cove can be attributed to these sub sales:

Projects No of Buy/Sell Transactions Average Returns ($) Average Returns (per cent) Average annualised returns (per cent) Average holding period
CORAL ISLAND 4 $4,100,000 64.8per cent 22.2per cent 2.8
KASARA 2 $2,372,000 16.4per cent 24.2per cent 0.7
OCEAN 8 1 $1,800,000 62.5per cent 83.5per cent 0.8
PARADISE ISLAND 6 $2,934,358 30.4per cent 44.9per cent 1.7
SANDY ISLAND 1 $1,220,000 9.9per cent 4.8per cent 2.0
THE AZURE 35 $896,733 46.0per cent 44.8per cent 1.7
THE BERTH BY THE COVE 55 $675,837 44.9per cent 33.9per cent 1.7
THE BERTHSIDE 3 $1,549,257 67.5per cent 34.8per cent 1.5
THE COAST AT SENTOSA COVE 45 $574,532 14.1per cent 33.8per cent 1.6
THE OCEANFRONT @ SENTOSA COVE 100 $884,085 30.6per cent 36.6per cent 1.8
THE VILLAS @ SENTOSA COVE 2 $2,380,000 92.3per cent 56.0per cent 1.3
TURQUOISE 1 -$594,770 -9.0per cent -3.2per cent 2.9

We're not sure if it's fair to include Ocean 8, as it's actually a leasehold landed project. But one of the reasons it had such a high sub sale gain is its scarcity: there are only eight available houses. So if someone with the purchasing power really wanted one, it explains the 83.5 per cent gain.

Perhaps the most unusual transaction here is Turquoise, as it is rare to accept a loss on a sub sale. This may have been a seller facing a drastic change in financial situation, issues over bank financing, etc. 

The Oceanfront @ Sentosa Cove is a good reflection of why the SSD happened. This project was completed in 2010, just before the period when SSD was implemented; and notice how high the number of sub sales was (100 transactions). House-flipping really was a major issue at the time.

From the above, sub sale transactions account for about a third of the profits for the following condos:

 
Projects New to sub sale Total per cent New to sub sale
THE AZURE 35 118 30per cent
THE BERTH BY THE COVE 55 202 27per cent
THE COAST AT SENTOSA COVE 45 171 26per cent
THE OCEANFRONT @ SENTOSA COVE 100 276 36per cent
TURQUOISE 1 28 4

For these condos, we have to attribute at least part of their good performance to sub sales and the lack of SSD at the time. This isn't a repeatable phenomenon for them.

Now let's eliminate sub sales, and look at the new-to-resale market:

Projects No of Buy/Sell Transactions Average Returns ($) Average Returns (per cent) Average Annualised Returns (per cent) Average Holding Period First sale date
THE BERTH BY THE COVE 63 $1,095,940 71.0per cent 11.5per cent 8.2 25/11/04
THE AZURE 22 $1,641,087 81.7per cent 10.4per cent 7.3 9/9/05
THE OCEANFRONT @ SENTOSA COVE 42 $635,780 23.2per cent 2.2per cent 11.9 13/7/06
THE COAST AT SENTOSA COVE 63 $272,887 7.5per cent 1.9per cent 9.8 7/10/06
TURQUOISE 21 -$2,834,535 -43.8per cent -5.7per cent 10.7 24/10/07
MARINA COLLECTION 12 -$2,008,322 -29.3per cent -2.9per cent 12.2 8/12/07
SEVEN PALMS SENTOSA COVE 1 -$7,120,000 -44.5per cent -6.3per cent 9.0 8/9/09
THE RESIDENCES AT W SINGAPORE SENTOSA COVE 1 -$1,460,800 -39.9per cent -3.7per cent 13.4 7/4/10
SEASCAPE 14 -$2,671,679 -33.8per cent -4.6per cent 9.7 26/3/10

There are stellar performers: The Oceanfront @ Sentosa Cove joins The Berth and The Azure. Many of the reasons were already discussed above. However, if we look at the dates of initial purchase, we can see they were all bought between 2004 to 2006. Condos purchased after this point are the ones that tend to lose money. 

As such, you can see that the main winners of Sentosa were those who took the plunge and bought early. Most of the rest who bought in 2007 (which coincided with a property high), were those who lost big.

Speculatively, this may be due to the nature of the luxury market. When you have luxury projects very close to each other (and Sentosa Cove has nothing but luxury), developers have to differentiate their products somehow. This may result in increasingly pricey finishings, more upscale facilities, etc. to outdo the neighbouring condos. 

Couple this with how new launches are always priced higher than existing resale counterparts, and a buyer demographic that doesn't have to care too much about returns: what you end up with are very pricey homes, which are increasingly intended as indulgences and not investments. 

But given the relative age of some of these condos now, besides the allure of the waterfront lifestyle, they may just be losing out in terms of the hard product to newer luxurious projects on the mainland.

Finally, if you do want to consider investment returns, here's a look at how big and small the losses/gains have been:

Most profitable

Project Name Transacted Price ($) Area (SQFT) Unit Price ($ PSF) Sale Date Returns ($) Returns (per cent) Type of Sale Holding Period (Years) Annualised Returns (per cent)
THE BERTH BY THE COVE $997,040 1367 $729 12/28/2004 $1,502,960 151per cent New Sale to Resale 5.4 18.6per cent
THE BERTH BY THE COVE $2,208,800 3089 $715 12/27/2004 $3,320,510 150per cent New Sale to Resale 2.7 40.5per cent
THE AZURE $1,691,000 1927 $878 10/19/2005 $2,509,000 148per cent New Sale to Resale 5.8 17.0per cent
THE AZURE $1,697,850 1744 $974 10/26/2005 $2,487,750 147per cent New Sale to Sub Sale 1.8 65.1per cent
THE AZURE $1,632,000 1744 $936 10/24/2005 $2,268,000 139per cent New Sale to Resale 5.2 18.2per cent
THE BERTH BY THE COVE $1,382,400 1658 $834 5/9/2005 $1,809,250 131per cent New Sale to Resale 2.6 38.0per cent
THE BERTH BY THE COVE $1,838,700 1905 $965 2/1/2005 $2,352,300 128per cent New Sale to Resale 2.8 34.2per cent
THE AZURE $1,687,950 1711 $986 10/18/2005 $2,158,378 128per cent New Sale to Sub Sale 1.7 62.3per cent
THE AZURE $2,395,050 2271 $1,055 11/4/2005 $3,055,350 128per cent New Sale to Sub Sale 2.4 40.9per cent
THE BERTH BY THE COVE $2,240,100 3089 $725 12/10/2004 $2,679,900 120per cent New Sale to Resale 2.8 32.4per cent

Least profitable

Project Name Transacted Price ($) Area (SQFT) Unit Price ($ PSF) Sale Date Returns ($) Returns (per cent) Type of Sale Holding Period (Years) Annualised Returns (per cent)
TURQUOISE $9,532,280 3746 $2,545 11/7/2007 -$5,132,280 -54per cent Sub Sale to Resale 10.8 -6.9per cent
THE COAST AT SENTOSA COVE $11,469,600 4779 $2,400 8/16/2007 -$6,169,600 -54per cent Sub Sale to Resale 13.2 -5.7per cent
TURQUOISE $6,038,490 2185 $2,763 10/29/2007 -$3,138,490 -52per cent New Sale to Resale 7.7 -9.1per cent
SEASCAPE $12,800,000 4069 $3,146 6/28/2010 -$6,600,000 -52per cent New Sale to Resale 6.6 -10.4per cent
SEASCAPE $6,265,000 2336 $2,682 3/26/2010 -$3,165,000 -51per cent New Sale to Resale 9.2 -7.4per cent
THE AZURE $7,200,000 3165 $2,275 10/29/2007 -$3,600,000 -50per cent Sub Sale to Resale 13.4 -5.0per cent
MARINA COLLECTION $9,295,000 3272 $2,841 3/27/2008 -$4,645,000 -50per cent New Sale to Resale 15 -4.5per cent
TURQUOISE $9,132,075 3735 $2,445 11/6/2007 -$4,429,575 -49per cent New Sale to Resale 13.5 -4.8per cent
TURQUOISE $5,426,960 2088 $2,599 11/2/2007 -$2,626,960 -48per cent New Sale to Resale 12.3 -5.2per cent
SEASCAPE $11,000,000 4133 $2,661 12/21/2011 -$5,200,000 -47per cent Resale to Resale 3.4 -17.2per cent

The recent ABSD measures, hiking up rates to 60 per cent for foreigners, unfortunately, bodes ill for Sentosa Cove.

ALSO READ: What makes a small boutique condo profitable?

This article was first published in Stackedhomes.

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