Sentosa Cove- a place deemed to match Monte Carlo and the only area in Singapore where foreigners are allowed to own landed property- is observed to be silent these days. Luxurious house with private berths are also seen empty and only a few apartment blocks switch on lights at night.
The prices in the said area where two of mining tycoons from Australia – Nathan Tinkler and Gina Rinehart- bought properties have sunken down to 20% since last year as limitations on funds borrowing and taxes for foreign property buyers went up. Investors have observed the decline in the value of their property. In the meantime, developers are still working hard to turn the keys of their projects despite the plunge in the selling price.
It is observed that real estate websites have been listing and offering hundreds of apartments and bungalows online to sell them. Unfortunately, based on the data from URA, the effort only resulted to the sales of 12 apartment units one landed property all through the year in Sentosa.
With how things are going, there is a speculation that the coming year would be critical for the banks unless the restrictions on borrowing are cooled down. This however does not mean to be happening soon since the government is seeing their intended effect after the price of private houses went up 60% in 2009 till 2013. The decline of new mortgage business of the lenders in the country has reached 40% compare with the recent year’s performance.
The problem faced by the investors is heightened by the cutbacks in allowances for the housing of expats which led to lower rental rates. The caused is the grant of permanent residency to a number of foreign workers in Singapore.
On survey, it was found out that out of the 32 cities all over the world, Singapore’s prime residential market has the worst performance during the firt half of the year. Prices have plunged down to 7.3%.
Moreover, the measures implemented by the government led to a sharp drop on the number of foreign buyers availing luxury properties. In 2010, foreign buyers have made up most of the buying in Sentosa.
Previous buyers are now suffering from 20-30% drop in the value of their property than when they originally bought it. Worst, rental rate is not even sufficient to cover the mortgages of such properties. One of Singapore’s biggest lenders- United Overseas Bank- reported that they are experience increase in their bad debt charges during the 2nd quarter of the year. Accordingly, developers are currently having hard time to service higher loans for property.
Moreover, the number of auctioned properties offered by banks is also increasing due to the increasing number of defaulted mortgages. Statistics showed that the number had increased up to 64% from during the first part of the year compared with the 16% increase in the 2nd half of 2013.
In August, a four-bedroom unit in Turquoise condo was auctioned for $3.88m under mortgage sale. This equated to S$1,400 psf In 2012, a unit in the same block was sold for S$2,450 psf and another unit was sold for S$2,800 psf in 2007. For this year, in February, only a six-bedroom flat from Treasure Island was sold in Sentosa for the price of $17m. The same unit was originally bought for $20.2 in 2012.
Developers now fear that foreign buyers in the luxury property segment have finally said adieu.
Southeast Asia’s iconic developer- City Developments stated that foreign buyers have turned and are currently focusing their investment outside the country.