The Real Deal New York

When buying luxury property abroad goes wrong

Foreign investors in Singapore's Sentosa Cove are selling at high losses
September 23, 2018 12:00PM

Sentosa Cove in Singapore overlaid with a disappointed face (Credit: Sentosa Cove and Pixabay)

Loss-making deals have become the norm for foreign investors in Singapore’s billionaire haven.

Known as Sentosa Cove, sellers are racking up losses as high as 40 per cent, according to Bloomberg. Dubbed one of the most exclusive neighborhoods in the straits, the reclaimed island is a 15-minute drive from downtown and home to more than 2,000 private houses and condominium apartments.

The residential enclave is also a bellwether for the luxury real estate market in the Asia-Pacific, which, for the past decade, has been flush with foreign cash from a bullish commodities market.

Although foreigners accounted for a third of luxury purchases in Singapore last year, Sentosa Cove is the only area in the country where they can legally buy landed property.

But now, investors are eager to exit. According to Bloomberg, one British homeowner recently put his 4,822-square-foot unit at Seven Palms on the market for S$12 million. He bought the property in 2010 at S$16 million.

A slowdown in international trade and government-imposed rules have seen prices fall to their lowest since 2009 – a 30 per cent decrease on their 2011 highs.

Coinciding with a slump in the commodities market, Sentosa Cove’s property values began to fall in 2013. These trends have been further compounded, however, by a hike in stamp duty for foreign investors, which has doubled to 20 per cent since 2011.

The stamp duty changes came into effect after midnight on July 5th, shaking off the optimism banks felt at the beginning of the year.

While private-home sales tumbled 64 per cent in August, in Sentosa Cove, data from PropertyGuru Group shows that the number of for-sale listings on the island is up about 7 per cent from a year ago as investors scramble to cut their losses. [Bloomberg]Patrick Mulholland