Rentals making gentle waves at Sentosa Cove

Business Times - 03 Jul 2008


Rentals making gentle waves at Sentosa Cove

They could hold firm despite gloom elsewhere and offer decent yields

By ARTHUR SIM

(SINGAPORE) Close to 300 homes at Sentosa Cove, including 200 condominium units, have received Temporary Occupation Permit (TOP) and the exclusive enclave is starting to bustle.

DTZ Debenham Tie Leung, which is the property manager of the 200-unit The Berth by the Cove says that the development is now about 70 per cent tenanted.

It added that the remaining units of the fully-sold development are owner-occupied, some of which are weekend homes or holiday homes for foreigners.

Other developments that have received TOP include The Berthside, Ocean 8, The Villas @ Sentosa Cove, Coral Island and North Cove.

Expected to come onto the leasing market next is the 116-unit The Azure, which is also fully sold.

And the popularity of The Berth by the Cove with the leasing market bodes well for the remaining 2,200 homes that are still being constructed.

DTZ senior director (research) Chua Chor Hoon said that the supply of new homes in Sentosa Cove is still 'limited' compared to the rest of Singapore and the units have 'the unique feature of close proximity to the sea'.

Saying that the limited supply of units in Sentosa Cove will limit any downward pressure on rentals, Ms Chua added: 'Rental prospects are likely to be better.'

This upbeat outlook for Sentosa Cove is particularly pertinent at a time when new housing supply is expected to flood the rental market by next year.

In a recent report, DTZ noted that in general, rentals would come under pressure between 2009 and 2011, not just from new supply but from the sub-sale market as well as it is unlikely that speculators will want to hold units for low rental income.

DTZ said that based on its basket of non-landed properties in the prime district (excluding luxury properties) average monthly rents are currently still holding steady at $4.90 psf per month.

While DTZ did not reveal rentals at The Berth by the Cove, a check with SISV-Realink shows that the rental for a unit there contracted for $19,500 per month in May.

Colliers International also said it believes median rentals could be around $6 psf per month.

Colliers director (research and advisory) Tay Huey Ying added that based on the average launch price of The Berth by the Cove of about $860 psf in 2004/2005, investors who bought units at this price could now be enjoying a net rental yield of about 5.5 per cent.

Those that bought units from the secondary market later when the price rose to about $1,500 psf will be looking at a net rental yield of 3.5 per cent.

'Nevertheless, these investors would still be enjoying a higher net rental return compared to those who invested in a freehold luxury apartment on the main island of Singapore in recent times since the latter are generating average net rental returns estimated to be in the region of 2.3 per cent,' added Ms Tay.

In time over 1,700 condominiums will be completed. Savills Singapore director (marketing and business development) Ku Swee Yong believes that buyers for most of these units will be investors, suggesting that a majority will be put up for lease.

Still, he said that there is a niche market for this type of waterfront home. 'We had an expat client who was looking to rent and after showing him a few options, he chose The Berth because he already has a yacht,' reveals Mr Ku.

Interestingly, Mr Ku says the advent of the integrated resort on Sentosa may not necessarily guarantee a pool of tenants. 'Not everyone will want to live so close to work,' he added.

What he does believe is crucial to the success of Sentosa Cove as an exclusive enclave is the provision of high end amenities. He added: 'Once these are completed, we believe Sentosa Cove rents could demand a premium over Orchard Road.'

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.