Singapore ECs a still a win-win proposition for purchasers
Limited supply drives up EC prices
The market is undersupplied with ECs. In the 10 years following 2014, the number sold of new ECs (16,893 units), has consistently outpaced the amount launched (19,072 unit).
Lumina Grand Bukit Batok Avenue 5, 512 units, is the only EC that has been launched to date this year. The EC supply for this year will be lower than average, with 1,689 ECs being launched every year between the years 2014 and 2023. In comparison, 4,936 unit were released in 2015 and 3,750 units during 2012.
The median cost of new ECs grew by 28.9 % from S$1,101 psf a year ago to S$1,417 psf a year later.
Over the same period, prices for new non landed properties increased by 49.4percent from S$1,664psf psf psf.
EC’s price growth is slower than other segments
ECs sold at lower price than private condominiums despite private developers. The government provides grants for new ECs comparable to those that are given out for housing apartments. After 10 years, the government can sell foreigners units within an EC.
ECs do have stricter conditions of purchase, including eligibility requirements, minimum periods of occupancy (MOP), resale criteria, and a more restricted buying process. This is similar to the public housing build-to-order program. Singapore citizens and Singaporeans married to permanent residents must meet certain requirements to qualify to buy a brand new EC. In addition, the buyer is not allowed hold another property during the MOP. The mortgage servicing rate (MSR), in addition the total debt-servicing ratio (TDSR), must be adhered to.
The income ceiling and the lending limits may be a factor in why EC is lagging behind other segments. The limits are set to allow more people to afford the property without having to overstretch themselves.
A 30 percent MSR will be added to the existing TDSR rule for EC buyers. This means that borrowers cannot use more than 30 percent of their gross month income to pay their mortgage. Moreover buyers of new ECs have to adhere to a limit on their household income.
The cost of EC may cause buyers to be priced out if the price rises too fast.
Consider a married couple with a combined monthly income of S$16,000 purchasing a new EC. They can only lend up to 75 percent of the cost of the property. Based on their MSR and income, this comes to approximately S$1,000,000.
If the buyers decide to buy a 1000 sq ft new EC with three bedrooms for S$1.4m, at S$1,400 psf each, S$400,000 will be required in cash or in CPF (of the total, 5% must be in cash), as well as stamp duties, lawyers’ fees and other costs.
Priced to be affordable for larger spaces
Private residential buyers who want a unit of atleast 1,000 sq ft under S$2m have limited options. By 2023, it will be more difficult to find an affordable unit of at minimum 1,000 sq. ft. for less than S$1.5million.
The number of such units accounted to 32,4 per cent (122) of all the new EC purchases (376) in 2013.
43.9 percent (165 units) new ECs have been sold at a minimum of S$1.5million, but less than S$2million. In 2023, a mere 1.7% of new private condo units larger than 1,000 sq.ft (or 33 units) were sold for this price. 88% or 1,716 new condos were sold below S$5M but above S$2M. For new landed houses, the cheapest units last year cost at least S$3million.
This number includes 1,307 unit that generated a net profit of atleast S$500,000 each. Seven units were worth more than S$1,000,000.
The highest recorded profit was from a CityLife@Tampines apartment, purchased in 2013 for S$1.91 and resold at S$3.29million in 2021. This unit generated a record-breaking profit of S$1.38million. The next largest gain was from an apartment at Esparina Residences. It was resold to a profit in 2023 of S$1.33million. The Tampines Trilliant EC resold with a gross profit just above S$1.19 Million in 2023 was ranked third.
The recent price increase of ECs has yielded high profits compared to the cost of private condos. CPF Housing Grant Scheme also offers housing subsidies up to S$30,000.
The launch prices for EC may continue rising, resulting a lower profit margin at resale. However, we predict that demand will remain high in the longer term due to EC’s limited supply and comparatively less expensive price points compared with private properties.
In the near-future, the government will release for sale only one of two sites for a 710unit EC at Jalan Loyang Besar. Two additional EC sites on the Reserve List will yield approximately 855 units. However, these reserves sites will not be opened for tendering until the government receives an offer that meets its minimum price requirements.
Price and demand could be sustained in the coming year given the limited supply.
New executive condo prices are up, but a strong market and a short supply will maintain the price.
Prices for new executive condominiums have risen at record levels. This popular hybrid segment combines private condos facilities with criteria that qualify people to live in public housing.
New launch price rose with rising demand, limited supply and increase in land prices for EC development.
According to data provided by the Urban Redevelopment Authority (URA), new ECs are expected to hit a new price high in 2023 of S$1,417 psf.
ECs remain comparatively inexpensive compared to similar new homes.
Profit potential
ECs that were sold profitably are the majority. The gain and loss of each EC was calculated by comparing URA Realis’ new sale caveats in 2007 and 2023 against the resale caveat of that unit. The calculation does include legal costs and interest.
Six,341 caveats matched were extracted from a 28.652 new EC transaction database. Almost 99.95 per cent (6 338 units out 6 341) of the sample ECs yielded a gross profit average of S$360,000.
