Dragons, Like Birds, Navigate via Magnetic Markers
Part of the sea near the far continent has something that causes the magnetic pull of the earth to behave erratically. Or add in some sort of electro-magnetic disruption that messes with their heads in a way that doesn't affect humans (much). It is situated so that it is impossible to go around it without adding at least 500 miles to the voyage.
This poses no problem for ships as they can use the stars to navigate well enough until their compasses work again.
But the dragons can't function there. They avoid it instinctively. Any dragon who gets close feels so uncomfortable (or even in pain) that they turn around and get the hell out.
This problem did not exist when the dragons lived on the far away continent and began after they migrated (or perhaps it spurred the migration). Imagine, for example, an astroid hitting the ocean and continuing to mess with local magnetism.