Australian hedge-fund manager Stephen Fisher says he was lucky to have bought his luxury home on Sentosa, a Singapore resort island that has attracted the wealthy, in 2005, before property curbs kicked in.

“I would be very wary of buying a second property in Singapore as I would have to pay higher taxes, which makes it less attractive,” Fisher, 50, chairman of First Degree Global Asset Management, said in a phone interview.

Sentosa, where Australia’s richest woman, Gina Rinehart, and telecommunications billionaire Bhupendra Kumar Modi have homes, is losing its appeal. Taxes as high as 18 percent on foreigners purchasing property introduced in 2013 have depressed prices and sales.

Condominium prices in the residential enclaves that line the seafront with sweeping views across the Singapore Strait are near their lowest levels since the end of 2006 based on 15 transactions, according to Maybank Kim Eng Securities Pte. Some bungalows are being sold for more than 50 percent below the peak in 2012, Urban Redevelopment Authority, or URA, data show.

Singapore has been trying to rein in the property market since 2009, with the toughest measures, including stricter lending, introduced last year. The island-state is unlikely to ease the curbs until “a meaningful correction” takes place, Finance Minister Tharman Shanmugaratnam said Oct. 28.

“The way prices have fallen is like during the crisis time” in 2008, Alan Cheong, a Singapore-based director at broker Savills Plc, said, referring to values on Sentosa Island. “The measures have impacted demand and we are seeing a diversion of interest by foreigners away from here.”

Home prices on Sentosa have fallen about 40 percent since 2012, compared with a 28 percent drop in 2008, Cheong said.

Luring Foreigners

Among the government’s curbs have been a cap on debt at 60 percent of a borrower’s income and higher stamp duties on home purchases. Additional taxes for foreigners buying residential property were raised to 15 percent in 2013 from 10 percent, on top of the basic buyer’s stamp duty rate of about 3 percent. All home sellers need to pay 16 percent in levies if they sell within the first year.

Singapore home prices reached a record high in the third quarter last year amid low interest rates. They have fallen every quarter since, sliding 3.8 percent in the longest stretch of declines since the global financial crisis in 2008.

In 2004, the island-state eased rules to allow foreigners to buy land for development on Sentosa, luring buyers from Australia to Russia. Sentosa Cove, home to marinas and sprawling houses, became the first location where foreigners were allowed to own stand-alone homes with easy approval from the Singapore Land Authority.

Modi, Rinehart

“The curbs were to help the Singaporeans, but in the process they are also curtailing the growth prospects of the country,” Modi, who estimates his net worth at $2 billion, said in a phone interview. “The government needs to differentiate between global and local citizens.”

Modi owns two properties in Sentosa, which means peace and tranquility in Malay.

Rinehart, Australia’s richest person in the Bloomberg Billionaires Index, owns two apartments in the Seven Palms Sentosa Cove project, Rinehart’s closely held Hancock Prospecting Pty confirmed. A company associated with Rinehart bought the apartments for S$57.2 million ($44 million), The Business Times reported in July 2012.

Tourism Attraction

Sentosa, connected to Singapore by a 710-meter (0.5 mile) causeway, was once a military base and housed a prisoners-of-war camp during the Japanese occupation in World War II.

In the 1970s, the Singapore government decided to develop the 500-hectare (1,236-acre) island into a holiday resort to boost tourism. Resorts World Sentosa, built by Genting Singapore Plc for S$7 billion in 2010, houses one of the city-state’s two casinos and Southeast Asia’s only Universal Studios theme park.

The curbs have made home buying prohibitive for foreign investors, said Donald Han, managing director of Chestertons, a real estate broker in Singapore.

Homes larger than 2,000 square feet that cost between S$4 million and S$5 million have been hit the hardest by the stamp duties on purchases and sales, Han said.

Prices Slumping

Prices of some condominiums slumped as much as 45 percent from 2007, when they were first sold, at auctions earlier this year by banks that repossessed them, according to Maybank Kim Eng.

A bungalow on 11,280 square feet of land on Treasure Island in Sentosa Cove was sold for 53 percent below the peak this year, while a 7,341-square-foot property on Paradise Island was priced 39 percent below the record S$3,214 per square foot, URA data showed.

Homes purchased after 2006 and sold in the last 12 months lost between 5 percent and 21 percent of their value, Ng Wee Siang, a Singapore-based analyst at Maybank Kim Eng estimates.

“It’s now taking two to three months longer to sell,” Mok Sze Sze, head of auctions in Singapore at broker Jones Lang LaSalle Inc., said.

Sentosa has nine condominium projects. The first four sold during the early recovery of Singapore’s property market in 2004 and 2005 for an average price of about S$1,600 per square foot, according to the Maybank Kim Eng report. The remaining five were sold later for more than S$2,600 per square foot. Higher-priced projects are at a greater risk of a correction, according to Maybank’s Kim Eng Ng.

Wait, Pick

Apartment prices on Sentosa have dropped about 43 percent from two years ago, data compiled by real estate research firm StreetSine Pte showed. Two units at Turquoise, a high-end condominium on the south side of the island developed by Ho Bee Land Ltd., changed hands at 45 percent discounts to their initial prices in the second quarter, as banks sold them off in auctions, Maybank Kim Eng said.

Shares of Ho Bee slid 1 percent at the close of trading in Singapore, extending declines this year to 6.6 percent. The benchmark Straits Times Index added 3.9 percent this year.

A couple of units at the Marina Collection, a premium project, were put up for auction earlier this year by banks which repossessed the properties after the owners couldn’t make the mortgage payments, Jones Lang LaSalle’s Mok said.

Secondary home sales in Singapore have been slowing, hitting the lowest since 2003 in the first quarter, before recovering, according to the URA.

High-net-worth buyers “will wait and pick and choose the right time to enter the market,” Mok said. “They have other alternatives overseas, so that’s pulling away funds.”

Fisher the hedge-fund manager questions the need for the property curbs.

“I don’t think there was a bubble so there was no need for such measures,” Fisher said. “It’s rational pricing for real estate in Singapore because the country is getting richer and their isn’t much land around.”