A. What has been happening in the Sentosa and Keppel Bay Property Cluster?
On September 19 2018, Straits Times published an article “The lost decade of Sentosa Cove, Singapore’s billionaire haven”. Average prices then was down almost 30% from their 2011 high with loss-making deals being the bulk of transactions.
Just as some market watchers thought prices would bottom then, this was a headline published by TODAY in June 2019. “Property prices at Sentosa Cove drop to record low, a unit just sold at 50% loss”.
Just across the island at the Keppel Bay enclave, the sentiment seems to be weak as well, prices have remained stagnant over the last decade, with numerous loss-making transactions by investors who could not hold on.
With so much doom and gloom within the Sentosa Cove and Keppel Bay enclave, it seems like a never-ending wait for prices to turn. This research article aims to look at what is the future potential of the area and whether the “lost decade” in this property cluster will be over soon.
B. Current Price Performance in this Property Cluster
Non-Landed Sales Details
As seen in the chart above, prices of leasehold Sentosa Cove condos (blue line) have been on a downtrend for the last 9 years, while prices of mainly freehold prime condos (grey line) have been inching up. This divergence of price has been due to the lack of demand for the area possibly due to cooling measures which largely affected Foreign purchasers most, while demand for prime properties in district 9 and 10 remain consistent as purchasers there are a mix of both Singaporeans and Foreigners.
It is interesting to note that the average price in the Sentosa Cove property cluster have fallen by 34% to S$1518psf and is now lower than properties in city fringes like Potong Pasir, Bishan and Marine Parade, which are averaging at S$1800psf. We will discuss more about this later in the article.
As seen from Image 3 above, the prices for properties at Keppel Bay have been stagnant. In particular, resale prices at the iconic Reflections at Keppel Bay have been stagnant for the past decade since launch with some loss making transactions over the past few years. Some owners are getting impatient at the lackluster performance to date (2019) and decided to cut loss.
Bungalow Sales Details
Bungalows in Sentosa Cove Cluster are a special class of landed properties that Foreigners are eligible to buy for their own stay subject to Land Dealings Approval Unit (LDAU) approval, which is usually granted within 48 hours. In all other districts, only Singapore Citizens can own landed properties, while Singapore Permanent Residents can apply for special approval with LDAU.
Bungalows within the Sentosa Cove cluster have had a premium versus Good Class Bungalows (GCB). However, the premium started to drop from 2013 to 2014 and again from 2015 to 2017. The current price premium between the two is currently at their lows.
On the other hand, data shows that sales in Sentosa Cove started to spike in 2017 but has tapered down, while transaction volumes for GCBs had a steady uptrend from 2014 to 2018.
Homebuyers in Sentosa and Keppel Bay have been predominantly mainland Chinese and Indonesians. However, with Brexit and slow growth happening in Europe, there is a chance that High Networth Individuals based in Europe could start looking for alternatives and Singapore could be possible destination since we recently signed a EU-Singapore Trade Agreement early 2019.
According to Monetary Authority of Singapore (MAS), the number of family offices in Singapore quadrupled from 2016 to 2018. Singapore is currently home to about 1,300 family offices out of an estimated 10,000 worldwide. What would be interesting is whether huge capital inflows into Singapore (including US$4 billion from Hong Kong reported by Goldman Sachs) will help boost sales for Bungalows in the cove. It remains to be seen, but the increase in capital inflow to Singapore could boost demand for waterfront homes in Sentosa and Keppel Bay clusters.
C. Current and Future plans for this Property Cluster
1. Regeneration of Sentosa
Regeneration works are already underway with 3 new hotels already up, Village Hotel at Sentosa, The Outpost Hotel, The Barracks Hotel and upcoming Villa-only Raffles Hotel Sentosa will be done by 2022.
New attractions at Sentosa are also being constructed now as part of the Sentosa 2030 Masterplan. The first new waterfront lifestyle area to be open in Sentosa by end-2019 will be Siloso Green.
Siloso Green will have shipping container theme bars, food trucks and live music under the stars. These are attractions that younger crowd will like and will definitely revitalize the island.
2. Re-development of Pulau Brani
Pulau Brani is currently part of our PSA port facilities. Pulau Brani eventually will be like Sentosa, the island will be turned into a theme park destination. It will also house Downtown South that is similar to Downtown East in Pasir Ris now. The first phase of the Sentosa-Brani Masterplan will be completed in 2022.
3. Regeneration of Mount Faber
One Faber Group is studying a new funicular system at Mount Faber to bring visitors from the foothills to the hilltops by 2023. This will provide easy and alternate access to Mount Faber.
4. Expansion of Resorts World Sentosa (RWS)
With a budget of S$1 billion, RWS has plans to expand Universal Studios Singapore (USS) to include two new themed environments – Minion Park and Super Nintendo World. The expansions are projected to complete by 2025.
5. New Keppel District
After the Keppel Golf Club lease expires in 2021, development plans for Keppel District can commence. There are plans to construct up to 9,000 homes in stages. The district will bring more vibrancy to the whole Keppel Bay area.
6. St James Power Station redevelopment
Mapletree, the current landlord of St James Power Station announced that they will re-develop the buildings into office complexes. Big Tech companies like Google, SAP and HP have presence in the nearby Mapletree Business City.
An office complex located in a power station could be a good idea as it would cater to the more “hipster” tech companies who want to attract millennial to work in their firm. Furthermore, the office complex will have waterfront views.
7. Completion of Circle Line (Habourfront – Marina Bay)
The final stage of Circle line stage 6 (as seen in the image below) construction will be completed by 2025. This will link Habourfront MRT station directly to Marina Bay MRT station, reducing travel time from Keppel Bay to the CBD.
The three upcoming MRT stations of Keppel, Cantoment and Price Edward will lay the transport infrastructure for the Greater Southern Waterfront developments to come. With the MRT lines completed, the government can now outline and commence construction works for the GSW. Year 2025 onwards will be very exciting time for the GSW. It is noteworthy to know that PSA was suppose to clear out Tanjong Pagar port by 2027, but announced that they will clear out earlier by 2025 instead. If anything, the timeline of the MRT completion matches with PSA vacating the terminal.
8. Greater Southern Waterfront City
From 2025 onwards, the actual plans for Greater southern waterfront’s other locations can be announced. Masterplan is announced by URA every 5 years. Since the latest Masterplan is 2019, we can expect the next Masterplan to be in 2024/2025. The timeline looks perfectly plan by our city planners.
Already, the artist impression of the future GSW City where the old PSA is located looks exciting. Images from CPG Consultants show the potential design of buildings within the GSW to be futuristic.
The GSW could be the place everyone wants to move to in the future, a district that Singapore residents aspire to live in while Foreigners wish their cities were as beautiful as.
D. What is the Future Potential of this Property Cluster
1. Value of Waterfront Homes
According to Global Waterfront Report 2019 by Knight Frank, 40% is the average premium for waterfront properties across 12 major cities. Amongst the Cities in the report, Singapore has the lowest waterfront premium of 7.7%. Which means there is still room for premium here to increase.
What was interesting is that Knight Frank found that Harbour views had the largest premium amongst waterfront homes. As more Foreigners look to Singapore as an alternate Financial Hub destination, premium of waterfront homes in Singapore could start to increase.
2. Attractive Valuations
Property prices of other prime and new-prime districts like Tanjong Pagar and Beach Road have reached S$4,000psf, while average prices in Sentosa and Keppel Bay clusters remain depressed. The chart below shows a comparison of the price S$psf for Reflections at Keppel Bay versus various other condos located in places like Bishan, Potong Pasir, Eunos and Bartley.
Using Reflections at Keppel Bay as an anchor property for comparison. Average prices of city-fringe properties are very close to the current price for Reflections. New Launch properties like Parc Esta located at Eunos and The Woodleigh Residences at Bidadari estate are selling for higher pricing compared to Reflections.
At fair value, the prices for condos at Keppel Bay should average S$2000psf and above. With the GSW plans commencing, the trading range of condos at Keppel Bay may be revised upwards.
One look at the chart above (Image 15), shows that average prices of a few Sentosa Cove condos are lower than Echelon at Redhill and Commonwealth Towers. This comparison is done to show that Luxury Sentosa Condo prices are lower than city-fringe condos.
Some readers may comment that the city-fringe condos I selected have just obtained TOP and are newer, however, the key point here is to look at price difference or gap between the different property clusters.
Prices of Bungalows in Sentosa Cove have dropped by almost 20%. I believe that selected Bungalows that have private berth will be in demand in future because one of the proposed plans for Habourfront Centre is to be redeveloped into a huge yacht club and the current cruise centre will move elsewhere.
3. The right time to start Positioning for revision of Trading Range
Studying the price movements of other property clusters like Marina Bay and Jurong Lake District that have had Masterplan announcements with huge infrastructure growth, we can conclude that entering early and getting into position before trading ranges move up.
Trading ranges usually move up when there are more expensive new condos being sold nearby. The en-bloc of Amber Park in 2018 meant that new selling price for the re-developed condo will be S$2500psf. Upon hearing the news, sellers of nearby resale condominiums immediately raised asking prices from S$1500psf average to S$1800psf which is the current trading price.
There is a possibility of this repeating at Keppel Bay. Keppel Land still has two plots of land, one located across the road from Habourfront Office Towers which is currently a carpark while the other is located on Marina Keppel Island. The launch prices for these 2 condos are anticipated to be higher than the existing Keppel Bay condos.
In addition, the new Keppel Golf Club redevelopment will include private residential as well. It is anticipated that prices of condos in the new Keppel district will likely be higher.
Once a property cluster’s trading range move upwards, a new base is formed and this new price becomes a support. The revision of trading range for property is usually the highest potential profits property owners will see because it is a special one-off price movement which is different from the usual price increase if the general property market moves up.
4. More than 20 years of Growth
The development of areas under the Greater Southern Waterfront (GSW) will last for more than 20 years. As outlined in part C of this article, new attractions and developments will be completed in phases. This means that there are multiple catalysts for property prices in the Sentosa Cove and Keppel Cluster to move up, reducing risks for property owners.
Image 16: Projection of various growth plans in Sentosa-Keppel Bay Cluster 2030
After numerous discussions with clients turned friends about Sentosa-Keppel Bay cluster’s growth plans and projections, I decided to do a projection and personal estimation on a timeline (Image 16). As it is my own collation from various sources and it includes my personal views, disclaimer applies.
Here is my personal summary of the timeline:
With the redevelopment of Keppel golf club into private residences and HDBs. There will be a regeneration of the whole area, and hence potential increase in capital values there.
From history, we can see that new projects launched at higher prices will increase valuations of surrounding resale properties. There same is likely to be true for Keppel bay, after the new estate starts construction about 3 years later (2022 onwards). Keppel land is likely to time the launch of their 2 remaining sites in Keppel Bay (as described above in point 3) sometime in 2022 onwards, inline with that.
By 2025, the circle line will be completed and travel to CBD from Keppel Bay will be easier and shorter.
This will also be time for the next masterplan (draft masterplan 2019 means the next is 2024/2025 if extended), more details of Greater Southern Waterfront will likely be announced.
By 2025, we expect USS and Sentosa to have further enhancements and most of the new attractions will be up.
By 2026, a clearer picture of the new St James Power Station to be converted into office buildings to be announced and soon there will be more office workers and hence increase demand for rental. The GSW developments will continue past 2030.
5. Sustainable Rental Demand
Google currently have a 500,000 sqft office space at Mapletree Business City II, it seems that their current space is not sufficient as Google announced in January 2019 that they are doubling their footprint in Singapore by taking another 400,000 sqft of office space at Alexandra Technopark, which is just beside the current office and just across the road from the new Keppel district. Google currently has more than 1,000 employees in Singapore and with the new office space, its likely that they will have capacity for another 1,000 employees.
Pasir Panjang is zoned as a Commercial Hub, it is likely that more tech companies could join Google, Pfizer, Coviden and HP to have their offices in this area. Furthermore, prices of rent in Pasir Panjang is lower than those within the CBD.
We believe that as Keppel district is developed and the area become even more desirable, there will not be a lack of tenants. In fact, there could be a chance that co-living operators like Hmlet and Cove will take up new condo units as more tech expats find living in the area more desirable. Queens, a condo located at Queenstown, which is not far from Keppel district is a hot spot for tech expats who want to rent a room in a condo unit.
6. Greater Southern Waterfront is a Strategic project for Singapore
The GSW project will position Singapore as the southern gateway of Asia, to renew and secure Singapore’s strong position on the world map. It took the Singapore Government huge efforts and patience to get a deal with Malaysia to have a land swap agreement to regain full ownership of the Tanjong Pagar Rail Terminal, which is where the future Cantonment MRT station is.
It was the final piece of the puzzle for the Circle Line’s final stage, and a strategic location as the centre of the entire GSW. With huge infrastructure spending and careful long term planning, the GSW project is likely to be very successful and will draw increased tourism and potentially more Global MNCs to setup their office at this waterfront district.
Lets look at the newest district in New York, Hudson Yards. This new waterfront city has attracted the largest companies in the world like JP Morgan, Amazon, CNN, Wells Fargos, KKR and Blackrock. It would not be a surprise that this is what Singapore planners have in mind for GSW. With this in mind, finding tenants and residents in the GSW district will not be an issue. Increased desirability to live in the area will support and send property prices up.
E. Is the lost decade for Sentosa and Keppel Bay over?
With so much happening in the area, it looks like a decade of revival and grooming for Sentosa and Keppel Bay. 2020 will be the beginning of a brand new decade for Sentosa and Keppel Bay.
Property prices in prime Orchard are above S$3,000psf, new properties at Newton are also priced at S$2,800psf, new properties at Tanjong Pagar and Beach Road are also hitting S$4,000psf levels. All these are happening while prices for resale private condominium at Sentosa and Keppel Bay are going for as low as around S$1,600psf.
Image 18: Comparison of prices of selected properties in Prime Districts
Pricing for properties in Keppel Bay are 50% lower than property prices in other prime districts. The probability of property prices reverting to mean, explained in another way, to move up to where they should be is high. There is a window of opportunity to get into position to benefit from this. For property buyers with ready funds, this is a good time to start exploring options. For those who are still gathering funds, this is also a good time to start exploring, while raising funds.
This does not mean close your eyes and just buy and hold. To take advantage of this massive growth opportunity, the right property selection process should be used. There are also mistakes to avoid when buying properties in the GSW (will be published in another article).
For those who are interested to know what are the property options to benefit from the GSW, I will release a follow up article on the ‘Top 10 homes you can buy in the Greater Southern Waterfront”, stay tuned for that!
Disclaimer: This article serves as a research article for information and educational purpose only. It does not constitute as a call to buy properties within the area. When you read this article, you agree to this disclaimer and the general disclaimer in this blog.