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ECs still popular among the sandwiched class

EXECUTIVE condominiums (ECs) were originally conceived to cater to the aspirations and needs of the so-called “sandwiched” class – those whose household income exceed the ceiling for public housing, but are not yet able to comfortably afford a private condominium.

Currently, the monthly household income ceiling to qualify for an EC purchase is set at S$14,000, versus S$12,000 for those purchasing the Housing and Development Board’s (HDB) build-to-order (BTO) flats.

Over the years, 60 ECs have been successfully launched. To date, 42 of them have been completed. Currently, 18 projects still have units available for sale in the market.

In recent years, the government has ramped up the housing supply. The HDB has released around 20,000 flats annually for sale since 2011.

This year, the figure is expected to be slightly lower, at around 18,000 new flats. Similarly, the supply of private condominiums has also been abundant. As at Q2 2016, there were 23,282 unsold private residential units coming from projects that have obtained planning approvals.

For a buyer with a monthly household income of up to S$14,000, purchasing a mass market private condominium is not out of the question, while those in the lower income bracket can easily take the HDB BTO route. Thus, amid the plentiful choices that a buyer has, are ECs still a relevant scheme in today’s market?

Steady demand for ECs

As an asset class targeted at the “sandwiched” category of buyers, ECs come with qualifying buyer eligibility criteria that are similar to public housing.

Buyers are also subject to resale restrictions that are partially lifted five years after the project’s completion. This means they can only resell to Singaporeans or Singapore permanent resident (SPR) buyers after the first five years. These resale restrictions are fully lifted 10 years after the project’s completion.

Besides satisfying the monthly household income criterion of not exceeding S$14,000, applicants must purchase an EC either by forming a family nucleus or with other singles if they are at least 35 years old.

Only Singaporean couples and Singaporean/SPR couples may purchase an EC unit. Also, buyers have to fulfil a mandatory five-year minimum occupation period (MOP) before they are allowed to rent out the whole unit or sell off the apartment.

Despite these restrictions, ECs come with a full suite of condominium facilities and are physically indistinguishable from private condominiums in design and physical outlook.

In the recently concluded land tender for the EC site at Anchorvale Lane, located next to Punggol Reservoir and near the Sengkang Riverside Park, there were a total of 16 bids put in by developers.

The plot, which can yield about 630 units, attracted the highest number of bidders for an EC site since the Yuan Ching Road site (now Lake Life EC) in July 2013.

Land hungry developers are optimistic about the outlook for ECs and expect the market to be able to soak up most of the remaining available units by the time they are ready to launch the project in late 2017 or early 2018.

So far in 2016, we have seen good and steady demand for ECs. According to data from the Urban Redevelopment Authority (URA), for the first seven months of 2016, 2,697 EC units were sold by developers. This has already surpassed the total 2,550 units they sold during the whole of 2015.

In addition, some of the best-selling projects this year have been ECs. Wandervale and Treasure Crest were two of the most successful EC launches since 2014.

Wandervale, the first EC to launch in 2016, sold some 50 per cent of its 534 units on the opening weekend, while in July, Treasure Crest sold some 72 per cent of its 504 units in the first weekend.

Existing EC projects have also been seeing sustained interest from buyers, with developments such as Bellewaters, The Vales and The Terrace seeing a steady stream of buyers even though they are not new launches.

Evidently, despite competition from mass market condominiums and public housing, ECs are still proving to be a practical and popular choice among buyers. While the pace of sales for some EC projects are faster than others, it is important to note that even for the EC projects that do not do as well initially, they do see a steady and sustained pace of sales over the development period, such that by the time the Temporary Occupation Permit (TOP) for the project is obtained, the majority of the units would have found buyers.

Rational, practical buyers

Typical EC buyers are either first-timers buying their matrimonial home, or families with young or teenage children that are upgrading from HDB flats.

They are buying for owner-occupation and not with the immediate intention to rent it out, as this option is only open to them after the first five years of occupation.

So these buyers behave very rationally and rarely buy on impulse. While some jostle with other buyers for choice units during the initial launch, others commit to their purchase only after they have made their rounds and have thoroughly researched the market.

For most EC buyers, the main appeal of ECs is the condominium address and lifestyle but at a cheaper price. ECs are typically priced at S$750 to S$850 per square foot (psf), while mass market condominiums within the vicinity are likely to be S$1,000 to S$1,100 psf onwards.

This puts the EC buyer on an immediate price advantage as he is essentially buying a product that has a similar look and feel of a mass market condominium at a cheaper price.

After 10 years from completion, the EC unit can also be sold to foreign purchasers. So, depending on the state of the market at the relevant point in time, the EC buyer may enjoy a larger capital gain compared to someone who had bought a mass market condominium unit at around the same time as the EC buyer.

Furthermore, eligible first-time EC buyers have the added advantage of using the CPF Housing Grant of S$30,000 to help pay for the purchase price. There are no housing grants available for private condominiums.

The second reason is a practical one. EC buyers are owner-occupiers and they are usually purchasing the unit to start a family.

The majority of EC projects offer mainly three and four-bedroom units, with the exception of some that may have a small selection of one and two-bedroom units.

In comparison, a mass market condominium may have more smaller-sized units than larger units as they also target the investor buyers who prefer a lower price quantum.

If so, the living environment becomes quite different when you compare an EC with a mass market condominium. In an EC environment, you are likely to find that the majority of residents are local families (of around the same age group) with children, while in a private condominium, it is likely to be quite diverse.

The third reason is the living space. Size matters when you have to house a family. Treasure Crest EC’s three-bedroom units measure 958 to 1,249 square feet, while its four-bedroom units are 1,345 square feet. Comparatively, a private condominium’s three-bedroom units may be about 880 to 1,100 square feet and their four-bedrooms may not exceed 1,300 square feet.

A matter of choice

A buyer who is eligible to buy an EC could also choose to stay in public housing, which is more affordable. Alternatively, private housing is also a viable option, albeit a more expensive one which may require taking up more debt for a longer period.

Whatever the choice, there is no “correct” housing type to buy. It all depends on the buyer’s preference, financial ability and household needs.

Ultimately, by introducing ECs into the market, the government is providing buyers with another housing option. With more variety in the market, buyers can then choose the type of housing that best suits their needs, rather than be limited to only public or private housing.

Herein lies the relevance of ECs.


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5 best-selling projects in August 2016

Property developers sold 805 housing units in August, including executive condominiums (ECs). The five top-selling projects, all located in the Outside Central Region (OCR), are:

1) Treasure Crest EC (OCR)
Developer: Sim Lian Group
Tenure: 99-year leasehold
Location: Anchorvale Crescent (D19)
Nearest MRT station: Sengkang MRT
Median price: $745 psf
Total no. of units: 504
Sales update: 56 units sold in August

2) Sol Acres EC (OCR)
Developer: MCL Land
Tenure: 99-year leasehold
Location: Choa Chu Kang Grove (D23)
Nearest MRT station: Bukit Panjang MRT
Median price: $781 psf
Total no. of units: 1,327
Sales update: 46 units sold in August

3) Bellewoods EC (OCR)
Developer: Qingjian Realty
Tenure: 99-year leasehold
Location: Woodlands Avenue 5 and 6 (D25)
Nearest MRT station: Admiralty MRT
Median price: $769 psf
Total no. of units: 561
Sales update: 37 units sold in August

4) Lake Grande (OCR)
Developer: MCL Land
Tenure: 99-year leasehold
Location: Jurong West Street 41 (D22)
Nearest MRT station: Lakeside MRT
Median price: $1,317 psf
Total no. of units: 710
Sales update: 35 units sold in August

5) The Trilinq (OCR)
Developer: IOI Properties
Tenure: 99-year leasehold
Location: Clementi Avenue 6 (D5)
Nearest MRT station: Clementi MRT
Median price: $1,413 psf
Total no. of units: 755
Sales update: 30 units sold in August


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August 2016 Sales Of Executive Condominiums

332 units of Executive Condominiums were sold in the month of August 2016.

Treasure Crest EC: 56 units sold at a median price of S$745 psf
Sol Acres: 46 units sold at a median price of S$781 psf
Bellewods: 37 units sold at a media price of $781 psf

AMID a lack of new residential project launches in August, executive condominiums (ECs) turned out to be best sellers.

Developers sold a total of 805 private residential units and EC units in August, down from July’s 1,921 units – with ECs taking up 41 per cent of the sales volumes in August.

Excluding ECs, some 473 private residential units were moved in August, about 8 per cent fewer than a year ago. But this marked a 57 per cent plunge from the active month of July, though the number of units launched (590 units) in August was only a 5 per cent fewer than in July.

The numbers were collated by the Urban Redevelopment Authority (URA) through a developers’ survey.

The only project launch in August was Victoria Park Villas, CapitaLand’s 99-year-leasehold landed project in District 10. The project sold only one unit in August for S$1,981 per square foot (psf) based on land area but had earlier moved seven units prior to its official launch.

The top three sellers in August were EC projects. Sim Lian’s Treasure Crest in Sengkang sold another 56 units in August at a median price of S$745 psf, followed by MCL’s Sol Acres in Choa Chu Kang where 46 units moved at a median S$781 psf. Qingjian Realty sold 37 units in its Woodlands EC project Bellewoods at a median S$769 psf.


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Anchorvale Lane EC site awarded

A hotly contested executive condominium (EC) site at Anchorvale Lane in Sengkang was awarded to Hoi Hup Realty and Sunway Developments on Monday (5 September), after the developers jointly submitted the top bid of $241 million, which translates to $355 psf per plot ratio, said the Housing and Development Board (HDB).

Launched for sale on 29 June under the confirmed list of the second half 2016 Government Land Sales (GLS) Programme, the 2.1ha site attracted 16 bids before the tender closed two weeks ago.

“The race to acquire land has become more intense given that this is the last EC site that will come on the market for the rest of the year,” said Desmond Sim, Head, CBRE Research, Singapore and South East Asia.

Located beside Punggol Reservoir, it is within proximity to the Tongkang LRT station and schools.

The 99-year leasehold site is expected to yield 635 units, said the HDB.


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16 bids for Sengkang EC site

There was a huge turnout for the last executive condominium (EC) site on offer this year, with 16 developers casting bids for an Anchorvale Lane plot that could yield about 630 units.

It was the highest number of bidders for an EC site since the tender for a Yuan Ching Road site, now Lake Life, in July 2013.

Hoi Hup Realty and Sunway Developments submitted the top bid of $240.95 million or $355 per sq ft per plot ratio (psf ppr). It was just 2.5 per cent above Wee Hur Development’s bid of $235 million or $346.30 psf ppr.

“Since so many parties were bidding competitively, their outlook on the EC market would be fairly optimistic, probably expecting a pick-up in demand and improvement in prices when the project is launched in late 2017 or early 2018,” noted Mr Ong Teck Hui, JLL national research director.

“The potential bottoming of the private home market would also have a positive effect on the EC market, as stable or recovering prices of private homes would augur well for EC prices as well.”

While the tender results showed many seasoned players, a surprise bidder was a joint venture between Treasure View and Raimon Land Development.

Mr Lionel Lee, chief executive of listed offshore support provider Ezra Holdings, and his brother, Adrian – non-executive director at upstream energy group Loyz Energy – are directors of Raimon Land.

Singaporeans Low Yuen Theng and Leong Suet Wah are behind Treasure View.

The area has several ECs with unsold stock, including Bellewaters, The Vales and Treasure Crest, noted Mr Nicholas Mak, SLP International executive director and research head.

About 296 units are unsold across these three projects, about the same number of flats you would find in a small EC project, he said.

However, given the top bid of $355 psf ppr, the developer would probably have to sell at over $820 psf ppr, above levels at the other projects and “a rather aggressive price”, Mr Mak added.

But despite an unprecedented quantity of unsold stock, the EC market has seen some traction in the last few months, said Mr Desmond Sim, CBRE research head for Singapore and South-east Asia.

The number of unsold EC units has been decreasing since the first quarter of this year.

The stock had dropped to 5,471 unsold units as at the end of June, from 6,520 units in the first quarter, he noted.

Developer interest was also fanned by the recent sales performance of the Treasure Crest EC in Anchorvale Crescent, which sold 72 per cent of units at its launch weekend last month, Mr Sim added.


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Number of sold homes reaches new heights at 1,921

Executive condos keep on luring buyers despite price dips.

Even with the real estate sector falling short in its performance for 2Q16, the Urban Redevelopment Authority (URA) has recorded an increase in transactions in the private condominium market, with 104% boost over the previous month.

The agency also registered the highest number of sold new homes this year since July 2015, when 1,655 units were sold.

Developers sold a total of 1,091 units for this month, compared with 536 units in June.

Meanwhile, there was a recorded 258% spike in the number of transactions for executive condominiums (EC), with sold ECs reaching to 830, according to ERA Real Estate

“The EC market continues to draw buyers, with 7 out of the top 10 best-selling projects being ECs.The EC market has already outperformed 2015 in terms of number of transactions, with 2,697 units sold in the first 7 months of 2016 compared to 2,550 in the whole of 2015,” the group said.

The registered improvement is amidst the price slip of 0.4% in 2Q16.

The group said this reflects the still-strong buying demand and the progressive absorption of abundant stock.

“This was due to several successful launches in the month of July,” the agency said in a statement.

The group expects developer sales to be about 7,000 to 8,000 units in private condominiums segment and 3,000-3500 units in ECs.


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Financing your EC purchase

With new executive condominiums (ECs) gaining popularity among home buyers, there has been an increase in the number of enquiries on financing for such properties. Unlike buying new build-to order (BTO) or resale HDB units in the open market, there is no HDB concessionary loan available for aspiring EC home buyers. Here is a guide for purchasers before they embark on their new EC purchase.

Note that key HDB rules are applicable on new EC purchases and are detailed in HDB’s website:

• CPF housing grant (for example, $30,000 CPF housing grant for first-time buyers);

• Resale levy (second-timers who apply for new EC projects where the land sale was launched on or after Dec 9, 2013 will have to pay a resale levy, similar to second-time applicants who are buying BTO flats);

• Minimum occupation period (MOP);

• Ownership on private property; and

• Dual-key EC units.

Assess affordability

The first step for EC home buyers is to assess affordability and home loan eligibility by obtaining an in-principle approval from the banks. Banks will require information on income and debts. This point will be explained in the later part of this article.

Option to purchase and sale and purchase agreement

An EC buyer will pay a 5% booking fee for the option to purchase (OTP), to exercise the sale and purchase agreement (HDB approval takes up to six weeks, before the developer issues the S&P agreement in the following two weeks), and pay the balance of the down payment within nine weeks of the OTP.

Apply for a home loan

Upon the payment of the 5% booking fee in exchange for the OTP from the developer, it is highly recommended that buyers apply for a home loan before exercising the S&P agreement.

The documents required are:

• OTP document issued by developer;

• Copy of purchaser’s identification document;

• Income documents;

• Latest statements on credit cards and any other home, personal and auto loans; and

• HDB InfoWeb “Financial information” printout.

Once the loan is approved, a letter of offer will be sent to the borrower. A lawyer from the bank’s panel of law firms will be appointed to act for the borrower and the bank.

Bridging loan

A home buyer who plans to use the cash from the sale of his HDB flat to pay for the new property can consider the use of a bridging loan (BL) when applying for an EC loan. This will effectively help him tide over any short-term financial needs. The bridging loan amount will be the difference between the purchase price or valuation of the new property, whichever is lower, and the applied home loan amount.

Legal work and final payment

The lawyer who acts for the EC buyer will advise on the unfinanced portion and the minimum cash component, as well as on the use of CPF. At the end of nine weeks from the OTP, when legal checks are completed, the lawyer will finalise the mortgage with the borrowers on key documents such as mortgage-in-escrow and deed of assignment. Within two weeks of exercising the S&P agreement at the law firm, the stamp duty will be payable (cash up front, with subsequent reimbursement from CPF if applicable).

Loan disbursement

Upon the booking of their new EC from developers, purchasers can choose to pay via the Normal Progressive Scheme (NPS) or the Deferred Payment Scheme (DPS). For those who choose NPS, the developer will instruct the buyer’s lawyer to have the funds released whenever a certain stage is completed. Monthly instalments will therefore kick in gradually based on loan disbursements by the bank, according to the different stages of the project completion. Under DPS, the purchaser can defer the 80% loan repayment till the project is ready to move in, that is, after having received the Notice of Vacant Possession or Temporary Occupation Permit. For home owners who are still servicing their existing HDB loan, no loan repayment on their new EC purchase is therefore required until TOP is served.

Depending on the payment scheme the EC buyer chooses, the lawyer representing the borrower and the bank will release the funds to the developer based on the different stages of completion for those buyers who are on NPS, unless they have chosen DPS for their EC purchase.

Loan-to-value, tenure and minimum cash down payment for EC purchase

For EC home buyers, the maximum loan to value ratio is 80% (see Chart 1 for loan-to-value ratio, tenure as well as minimum cash down-payment requirements when taking a bank loan).

Chart 1

EC Loan Chart 1

Total debt servicing ratio (TDSR) and mortgage servicing ratio (MSR)

EC buyers are subject to TDSR and MSR rules (see Chart 2).

Chart 2

EC Loan Chart 2

Banks will assess the buyer’s loan application based on both TDSR and MSR computations. Under the TDSR framework, banks need to review the monthly total debt obligations and gross monthly income. The TDSR computation therefore limits the amount of loan to borrowers, capped at 60% of gross monthly income less outstanding debt obligations.

MSR will also apply on ECs purchased directly from the developer, in addition to TDSR computation. The MSR limits the amount one can borrow on the purchase of the new EC, capped at 30% of the gross monthly income.

In terms of acceptable gross monthly income, the buyer has to furnish acceptable income documents for gross income computation. Do note that a 30% haircut will be applicable for variable income (the table below illustrates how the purchase price and maximum loan for an EC is derived based on both TDSR and MSR ratios).

Aden Pang is head of mortgage alliance at consumer secured lending, OCBC Bank. For further enquiries on EC loan financing, contact OCBC Bank at 6363 3333.

This article appeared in the The Edge Property pullout of Issue 738 (July 25, 2016) of The Edge Singapore.


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New lessons from recent EC launches

The handful of executive condominium (EC) projects launched this year has seen mixed results. On the weekend of July 16 and 17, Sim Lian Group’s Treasure Crest EC opened for bookings. It saw 362 (72%) of the 504 units in the project snapped up over the two days at an average price of $742 psf.

“In the current EC market, sales performance is primarily dependent on two factors — pricing and location,” says Ong Teck Hui, JLL national director of research. “At Treasure Crest, pricing appears to be the dominant factor in attracting buyers.”

Treasure Crest’s average price of $742 psf undercuts the other projects launched in the Sengkang-Punggol area in late 2014 to 2015. The four EC projects launched — Bellewaters, The Terrace, The Amore and The Vales — averaged $786 to $800 psf, notes JLL’s Ong. These four projects had land costs ranging from $331 to $367 psf per plot ratio (psf ppr) whereas Treasure Crest’s site was secured at $280 psf ppr, giving it the price-competitive advantage, he points out.

Beyond pricing, the spacious unit sizes of 958 to 1,345 sq ft were also a main draw, says Sim Lian Group. Location was pivotal, as the project is located in Sengkang New Town and a short walk from the Cheng Lim LRT station.

The previous weekend, Hao Yuan Investment launched its 358-unit Northwave EC. The project is located at the junction of Woodlands Avenue 12 and Gambas Avenue.

Northern districts — supply from earlier launches

The contrasting performances of ECs launched within a week of each other was also played out in the Sembawang area three months ago. The third week of April saw the launch of Qingjian Realty’s 632-unit The Visionaire at the corner of Canberra Drive and Sembawang Road. The Visionaire was also positioned as an EC with Smart Home features.

The launch of The Visionaire was followed just a week later by that of the 628-unit Parc Life at Sembawang Crescent by Frasers Centrepoint and Keong Hong Holdings. The project is adjacent to Canberra Park.

As at end-June, 195 units (31%) at The Visionaire were sold at a median price of $811 psf. Meanwhile, Parc Life sold 82 units (13%), with the latest median price at $759 psf. The difference in sales could be due to The Visionaire’s proximity to the upcoming Canberra MRT station. Some agents reckon the Smart Home features also drew buyers.

Parc Life and Northwave were the two latest EC launches in the northern districts of 25 and 27, which include Sembawang, Woodlands and Yishun. ECs launched in these districts in 2H2015 still have unsold units, notes Emily Eng, director of residential services at OrangeTee.

For instance, The Brownstone was launched a year ago and is 70% sold. Signature at Yishun was launched in end-September; the neighbouring The Criterion was launched in early October. As at end-June, 25% of the units at Signature at Yishun have been sold, while the take-up rate at The Criterion was 22%.

“These ECs were also launched within weeks of each other,” notes OrangeTee’s Eng. “There is a larger supply pool in the north, and competition is therefore more intense. Much of the demand had already been soaked up by these earlier launches by the time Parc Life and Northwave made their [respective] debuts recently.”

Double-digit vacancy rate

The main concern now is that the supply of ECs has outpaced demand, says Desmond Sim, head of research at CBRE Singapore and Southeast Asia. The number of launched and unsold EC units across the island was 4,112 units as at end-June, almost double the total of 2,232 units a year ago.

The spike in the number of unsold units is also due to the higher number of EC projects launched in 1H2016 relative to 1H2015 (see table). However, the number of EC units sold in 1H2016 was 1,850 compared with 2,550 units in 2015. “As the absorption rate has slowed, there’s now a supply overhang, which is unprecedented,” notes CBRE’s Sim. “ECs used to be sold out at launch. Five years ago, you rarely heard about high vacancy rates in ECs.”

There were 2,901 vacant units out of a total stock of 20,351 as at end- 1Q2016, bringing the vacancy rate to an all-time high of 14.3%. The higher vacancy rate could be attributed to the higher number of new EC projects completed in 1Q2016, including CityLife@Tampines, Waterbay in Punggol, Twin Fountains in Woodlands (adjacent to Bellewoods) and The Topiary, which collectively added 2,015 units to the inventory of completed units. Some owners of these newly completed projects may not have moved in yet, which also contributed to the higher vacancy rate, explains Sim.

The high inventory of unsold units could lead to a new phenomenon: privatisation of units within the same EC at different dates, notes CBRE’s Sim. “In the past, ECs tended to be 100% sold prior to completion,” he explains. However, if some of the ECs launched recently are not fully sold when the Temporary Occupation Permit (TOP) is obtained, then buyers who purchase after completion will have their minimum occupation period effective from their date of purchase. “It will be similar to those buying HDB flats under the Sale of Balance Flats Scheme, where the MOP of five years is effective from the point of purchase,” says Sim.



Silver lining

There is a silver lining to unsold stock in the EC market, as future supply has been curbed. Only one EC site has been put up for sale under the government land sales (GLS) programme this year. It was the recent launch of a 226,199 sq ft site at Anchorvale Link in Sengkang, which can be developed into a 635-unit project. The tender for the site will close on Aug 23. “URA and HDB are making a concerted effort to cut back on the GLS sites [allocated] for the development of ECs,” observes Sim.

There are only two other ECs in the pipeline for launch in 2H2016 and 1H2017. These are the EC at Choa Chu Kang Avenue 5 by Qingjian Realty in a joint venture with its investment arm Bohai Investments, and Suntec Investment; as well as an EC on Yio Chu Kang Road by Hoi Hup. “Going by the recent pickup in EC transactions, this will be a window of opportunity for developers to clear their existing stock,” says Eugene Lim, key executive officer of ERA Realty.

With the tender for the EC land parcel at Anchorvale Link closing on Aug 23, the earliest the new project can be launched will be 15 months later, which is end-2017, says OrangeTee’s Eng.

Deferred payment scheme

Unlike prime condos, ECs cannot be marketed overseas by developers, as they are a restricted product. And even though there is an option for EC buyers to take up a deferred payment scheme (DPS), most opt for the normal progressive payment because there is generally a 3% premium for the former, say property agents.

For example, at Treasure Crest, 85% of the buyers are said to have opted for the normal progressive payment, with only 15% taking up the DPS.

“EC buyers are very price-sensitive, so the 3% premium makes a lot of difference to them,” says Lim Yong Hock, key executive officer of PropNex Realty. “This is unlike the buyers of the completed prime condos that have recently offered DPS — they tend to be investors. EC buyers are 100% owner-occupiers who want certainty of purchase.”

Qingjian Realty offered to absorb the 3% premium for buyers who took up the DPS for three of its EC projects: Bellewoods and Bellewaters, which were launched in late 2014 and early 2015 respectively; and The Visionaire. This means buyers who opt for the DPS will pay the same price as those under the normal progressive payment scheme.

“Most people still opted for the normal progressive payment scheme at The Visionaire because the TOP is still some time away,” says a property agent who requested anonymity.

Conversely, the DPS scheme drew significantly more buyers at Bellewaters and Bellewoods. When the scheme with the 3% waiver for units purchased under DPS was launched in June, 43 units were sold at Bellewaters, making it the top-selling project in June, while 13 units were sold at Bellewoods. “Bellewoods and Bellewaters are expected to be completed next year,” says a property agent. “This gives buyers greater certainty to plan the sale of their existing HDB home, as they know when they are moving into their new EC. The DPS is therefore attractive to buyers in this scenario.”

According to CBRE Research, in mid-2015, there was also a 3% to 5% discount for selected units at Bellewaters and Bellewoods. The result was that more than 100 units were sold in each of the ECs in 3Q2015, according to caveats lodged. Both projects are substantially sold.

Some developers have also come up with creative schemes. At The Terrace, the developer offered a referral scheme in which the buyer gets a $10,000 rebate, while the referrer gets a $10,000 referral fee. At least 125 units have been sold under the scheme, based on caveats lodged so far.

MSR effect

The total debt servicing ratio (TDSR) has hurt sales in the private housing market, but the introduction of the mortgage servicing ratio (MSR) of 30% has had a greater impact on EC buyers.

The MSR is more restrictive relative to the TDSR. Assuming a couple has a housing budget of $700,000, at 3.5% interest rate and a 25-year home loan, the couple will need to have a combined monthly household income of at least $9,345 to meet the MSR limit to buy an EC of that price. Under a TDSR of 60%, the combined household income would only need to be $4,672 a month to afford a $700,000 private property, estimates ERA’s Lim.

The increase in the monthly household income ceiling for EC buyers from $12,000 to $14,000 last August has also received a mixed response from buyers. While the pool of eligible EC buyers may now be bigger, those in the $12,000-to-$14,000 income bracket may still eye private property as being more attractive, as their prices have softened, says JLL’s Ong.

Owing to the uncertainty in the economy and the job market, households with a combined monthly income of $10,000 may opt for “the safer choice” of buying BTO (built-to-order) flats instead of ECs. “This could further reduce the demand for ECs,” says Nicholas Mak, executive director of SLP International.

‘EC prices sticky downward’

Prices of private condos have generally softened by about 10%. By comparison, JLL’s Ong notes, prices of new EC projects have been more sticky downward and have fallen just 4% in mid-2016 from the peak of $826 psf in 1Q2015.

ECs are still attractive to buyers, as there is still a 20% to 30% price gap compared with private condos in the same area, says PropNex’s Lim. EC launches today are priced at $750 to $800 psf, and suburban condos in the same area are priced at $1,000 to $1,200 psf, he estimates.

Given the price gap, ECs are therefore still relevant in today’s market and serve the needs of the sandwiched class, says OrangeTee’s Eng.

For now, with a supply overhang of more than 4,000 unsold units — equivalent to the supply from eight projects — and slowing demand, the EC market may look bleak. As future supply shrinks, however, the unsold inventory will eventually be soaked up. “Over the long term, EC prices tend to be more resilient than those of private condos,” says Lim. “There is still demand for ECs, but buyers have a lot more choices.”

This article appeared in the The Edge Property pullout of Issue 738 (July 25, 2016) of The Edge Singapore.


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Executive condos: The real deal or just a hype?

Executive condominiums, a hybrid of private and public housing, have been perceived as a low-cost, high-return investment asset. This is not a baseless proposition. Most of us are aware that new ECs are typically priced at a 20% to 30% discount to private condos of similar attributes. Furthermore, they will attain condo status 10 years after they are completed. Intuitively, EC prices would catch up with condo prices towards privatisation, which underscores their value proposition.

The most notable example is Bishan Loft EC, which was launched in 2001. Prices increased 157% from $422 psf at launch to $1,084 psf this year. The project outperformed the URA price index for private non-landed homes, which trended up 56% over the same period. It also outshines Rafflesia Condominium in terms of price performance. Prices at Rafflesia Condominium appreciated 37% from $760 psf at launch to $1,043 psf this year. Located on Bishan Street 21, the condo is less than 400m from the Marymount MRT station and a stone’s throw from Raffles Institution.

The example is not unique to Bishan. Prices of ECs in less stellar locations have also rallied ahead of private condos. Take The Quintet EC in Choa Chu Kang, which was launched in 2003 at an average price of $367 psf. Prices have increased 110% to an average of $769 psf this year. In comparison, prices at The Warren, also in Choa Chu Kang, increased 76% from $445 psf to $781 psf over the same period. The Warren and The Quintet were completed in 2004 and 2006, respectively.

Price performance of randomly selected ECs versus comparable private condos

A foolproof investment asset?

In the past few months, some market watchers have vouched for ECs as a foolproof investment asset that offers superior investment returns compared with private condos. This is true for owner-occupiers because ECs are heavily discounted to private condos of comparable age in their vicinity, giving homebuyers a head start in the race for capital appreciation.

However, the downside of buying ECs is the resale and subletting restriction during the five-year minimum occupation period that may cause home owners to miss out value deals in the market. Home owners also lose the flexibility of renting the property should the need arise. Assuming a net rental yield of 2.5% to 3% for private mass-market condos, the subletting restriction would result in a cumulative 13% to 15% loss in rental yields over five years. Together with a construction period of three years, EC buyers may have to wait up to eight years to unlock the value of their properties. The upfront discount, therefore, serves to compensate for these restrictions.

It is also worth noting that EC prices are somehow still 2% to 5% lower than those of comparable condos even after they are fully privatised, with the exception of Bishan Loft EC. Units at The Quintet EC, for example, fetched $769 psf on average in 2016, 2% shy of the $781 psf transacted at The Warren. Similarly, units at Park Green EC in Sengkang changed hands at $718 psf this year, 4% below the $747 psf average price at Rio Vista in Hougang. Both developments were completed in 2004, although there could be micro-locational forces at play that cause the difference in their prices. One possible explanation is that private condos are perceived to offer better-quality products and finishes. However, this is subjective considering that recent EC developers have upped their game with thematic concepts, strong facilities and smart-home features.

Tipping the balance with location

The price appreciation for private condos near an MRT station may be more significant than that of ECs in their vicinity. This is evidenced by The Jade, which is located next to the Bukit Batok MRT station and West Mall. Prices appreciated at the same pace as those for The Dew EC on Bukit Batok Street 21 between their launch dates and 2016.

Separately, well-located old condos present an alternative buying opportunity. They are cheaper than new condos in their vicinity and prices could be on a par with new ECs. Most of us are familiar with the 1,006-unit Mandarin Garden Condominium on Siglap Road, which is one of the oldest condos in Singapore. Two 1,572 sq ft units on the low floors were transacted at an average price of $353 psf in 2001. Prices have since more than doubled to $834 psf, based on comparable transactions in 2016. The entry price of $353 psf and the 136% capital appreciation are not inferior to those of ECs that were launched in 2001, including Nuovo EC in Ang Mo Kio, The Dew EC in Bukit Batok and The Eden at Tampines EC. At the same time, the properties are not subject to the various restrictions associated with public housing. However, buyers must put up with an obsolete design and higher maintenance cost owing to wear and tear over the years.

Not all old condos offer a better investment proposition than ECs. Units at Elias Green in Pasir Ris, for example, were transacted at an average price of $357 psf in 2001. Prices have since appreciated just 60% to $572 psf this year.

Deal or no deal?

For owner-occupiers, first-hand ECs clearly offer an excellent arbitrage opportunity and the price appreciation is more pronounced after privatisation.

Price performance of ECs launched in 2001

Price performance of ECs launched in 2001

On the other hand, if the flexibility of selling and renting the unit is important, potential buyers may consider alternative assets such as older condos and new condos that are competitively priced. High Park Residences, for example, was launched in July 2015 at $989 psf. If such a deal exists in the market and affordability is not an issue, a homebuyer would be faced with equally attractive options between an EC and a private condo of the same league. However, there are limited choices in the market. The developer of High Park Residences paid less than $450 psf ppr for the land parcel in 2014. Since then, there have not been any sites that have fetched a price lower than that. As at June, there were only 37 unsold units in the project.

To maximise financial returns, homebuyers should look for ECs that offer higher discounts to nearby condos as well as those located near a transit node or growth corridor. Entry price has proved to be as important as location. Bishan Loft EC was launched at a 44% discount to Rafflesia Condominium, which was rolled out just one year earlier. Although we do not account for any factors that might contribute to the price difference, the significant gap in their launch prices would have a bearing on the investment returns for homebuyers.

Treasure Crest EC in Sengkang and Northwave EC in Woodlands are currently the most competitively priced new ECs in the market if we do not factor in the resale levy exemption and other forms of rebates offered at other projects. Their respective developers, Sim Lian Group and Hao Yuan Investment, paid about $280 psf ppr for the two sites in 2015, the lowest price for EC land since July 2011.

While private condos are perceived to offer better-quality products and finishes, some ECs are courting buyers with novel facilities and services that put them closer to private condos in terms of product offerings. Westwood Residences EC in Jurong, for example, is the first bicycle-themed development in Singapore that comes with a sheltered bicycle garage and designated bike maintenance area. Qingjian Realty positions The Visionaire EC as the next-generation smart home. Its smart-home apps let homeowners control the digital lock that allows access to the house as well as appliances, from air conditioners and water heaters to washing machines and refrigerators.