SINGAPORE -Activity in the 99-year leasehold bungalow market on Sentosa Cove seems to be thawing from the deep-freeze in July, shortly after the authorities plugged loopholes in late June that some property investors had been using to avoid paying higher additional buyer's stamp duty (ABSD).
These buyers had been making proxy purchases in the names of family members who don't own properties here.
The effects of the total debt servicing ratio (TDSR) framework, which was introduced at the same time, have also filtered down to some buyers in the upscale waterfront housing district. Despite deep pockets, HNW buyers often seek the maximum loan to take advantage of current low interest rates, say agents.
However, a year-end pick-up in deals is seen, led by purchases by Singapore permanent residents (PRs).
Newsman Realty associate director Steve Tay said: "Viewing activity started to pick up about one to two months ago. I believe we should see a few more deals before the year ends."
Some agents say owners have generally softened on asking prices to factor in ABSD. However, Mr Tay said that asking prices for properties facing the sea or a golf course remain around $3,000 psf.
Lionel Loo, senior sales director at DTZ Resale, says that with the ongoing Golden Week holiday in China, agents have been busy showing homes in the upscale waterfront locale to high net-worth individuals from China. Sentosa Cove is the only place in Singapore where foreigners who are not PRs are allowed to buy a landed home, albeit subject to government approval.
"Hopefully, we'll seal a few transactions soon," says Mr Loo, who notes that the bungalow market in Sentosa Cove has generally been quiet since the start of this year. He adds, however, that this mirrors the pattern in the same period of last year, but there was a spurt of activity in the last few months of 2012, helped by the rollout of QE3 in the US.
Recent bungalow transactions at Sentosa Cove include a house sold on Paradise Island for $15.5 million or $1,898 per square foot on land area of about 8,170 sq ft. The six-bedroom property, spread across two storeys and an attic, was bought by a European who is a Singapore permanent resident. A caveat has also been lodged for another house in the Kasara project along Ocean Drive on about 9,666 sq ft of land at $19.5 million or $2,018 psf. The buyer is believed to be a Singapore PR. Newsman Realty's Mr Tay is believed to have represented both the sellers.
There is also talk of a transaction done lately for about $16 million on Pearl Island.
Buyers these days are mostly Singapore PRs with their business and family based here. Mr Tay says: "Their motivation for looking for a bungalow on Cove is a house to live in, not for investment. Because they have a genuine reason to live in Singapore, they are able to justify paying the ABSD as part of their property cost."
On the other hand, a foreigner investing around the world but not based here, may baulk at having to pay ABSD and find better value in other property markets like the US and Australia, suggests Mr Tay.
Effective Jan 12, 2013, non-PR foreigners pay 15 per cent ABSD for any Singapore residential property purchase - up from 10 per cent previously. PRs now pay 5 per cent ABSD on the first purchase and 10 per cent on subsequent ones. (Singapore citizens are spared ABSD on their first home purchase but pay 7 per cent on the second purchase and 10 per cent on subsequent purchases.)
CBRE's analysis shows that PRs accounted for 54.5 per cent or six of the 11 caveats lodged so far this year for bungalow purchases on Cove. This is up from a 22 per cent share, or five of the 23 caveats last year, and 21 per cent share of the 24 caveats for 2011. In 2010, when bungalow deals on Cove peaked at 54, the PR share was 22 per cent.
One reason the PR buying share has risen is that the government no longer allows them to purchase landed homes in Good Class Bungalow Areas (GCBAs) on mainland Singapore. Prior to this rule change, said to have taken place sometime in second half 2012, PRs could buy a landed home in a GCBA with up to 15,000 sq ft land area.
There have also been anecdotes of foreigners becoming PRs prior to buying a landed home on Sentosa Cove to qualify for a lower ABSD rate, although market watchers add that criteria for obtaining PR status have been tightened in recent years.
Transactions this year have been mostly below $20 million. According to CBRE's analysis of URA Realis caveats data, only four of the 11 caveats lodged for Sentosa Cove bungalow purchases so far this year have been at prices at or above $20 million. For the whole of 2012, 12 of the 23 deals were in this price band.
The latest transactions at above $20 million were for two nearby bungalows along Lakeshore View, facing Serapong Golf Course and a lake. One changed hands in June at $26 million or $2,922 psf and the seller is said to be Bioskin Holdings founder Mathilda Koh and the buyer, a mainland Chinese who is a PR.
The other transaction, in May, was at $24.8 million or $2,952 psf. It involved a sale by a Malaysian to an Indonesian who is a PR here.
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