Supply of executive condos needs to be increased to meet red-hot demand

BASED on increasing private property prices and the tender bid for the Sumang Walk executive condominium (EC) site of S$583 per sq ft per plot ratio (psf), we predict that EC prices will cross S$1,000 psf in the year 2019.

Catered for the middle-income group, ECs are a public-private hybrid form of housing with the initial buyer eligibility and resale conditions completely lifted 10 years after the project has been completed.

ECs allow buyers with a household income of up to S$14,000 to own a product that is similar in terms of amenities and lifestyle to private condominiums, but at a lower price point and with the ability to use up to S$30,000 in government grants for their purchase.

ECs are definitely a valuable asset class and is a great stepping stone for HDB upgraders looking to enjoy lifestyle living at an affordable cost. With a price difference of about S$400 psf between ECs and private condominiums, buyers can achieve greater capital appreciation once the EC is fully privatised.

The demand for ECs in 2017 was overwhelming, with all 531 units of Hundred Palms Residences at Yio Chu Kang Road by developer Hoi Hup Realty sold out within seven hours of launch on July 22. It was reported that more than 2,700 e-applicants were received during a two-week window that ended five days before the launch, making it one of the most over-subscribed ECs of all times.

This level of demand is set to increase significantly as private property prices move quickly and are expected to rise further in 2018, possibly making it beyond the reach of many HDB upgraders today.

New private properties in the mass market segment are expected in the range of S$1,300 to S$1,500 psf, with a 1,000 sq ft property priced between S$1.3 million and S$1.5 million.

This is generally higher than the average budget of a HDB upgrader who would be willing to pay around S$800,000 to S$1 million for a private property. The high private property prices make ECs an attractive option for majority of these upgraders.

In 2018, there will be only one EC project to be launched in April - the 628-unit Rivercove Residences EC by Hoi Hup and Sunway Developments in the Anchorvale Lane neighborhood of Sengkang.

With the array of amenities in the area, alongside the unique facilities offered by the developer, Rivercove is set to receive high demand and be well over-subscribed during the upcoming launch.

As for the upcoming land supply for ECs, the next in line would be Sumang Walk, a Reserved List EC site under the H2 2017 Government Land Sales (GLS) programme which was triggered for sale in Dec 2017. The 2.7-hectare site adjacent to My Waterway @ Punggol can potentially yield about 820 residential units.

The Sumang Walk land site was hotly contested by 17 developers and was awarded to CDL Constellation and TID Residential on March 7 for their top bid of S$509.4 million or S$583 psf ppr.

The top five bidders have demonstrated the strong demand for EC sites and this will change the landscape of EC prices in the future.

With the project to be launched around May 2019, the expected selling price is set to be well above S$900 psf to S$1,000 psf. Nevertheless, even with the increased price, ECs will still continue to be an attractive choice since they are still 25-30 per cent cheaper than mass market condominiums.

Unlike private properties, developers of EC sale sites from the GLS programme will be allowed to launch units for sale only 15 months from the date of award of the sites or after the physical completion of foundation works, whichever is earlier.

Other EC sites to be launched in 2018 for tender include one from a Confirmed List site at Canberra Link, and two others in the Reserved List at Tampines Avenue 10 and Anchorvale Crescent - which might yield about 1,705 units in 2019. We expect both these Reserved List sites to be triggered due to the strong demand for ECs.

Aside from the upcoming EC units from Rivercove Residences, currently there are fewer than 200 launched but unsold EC units available in the market. These units are expected to move quickly with the current demand from home buyers.

Indeed, it is timely for Singaporean first-time buyers and HDB upgraders to make a move and purchase the existing stock of unsold EC units in the market. There are still many attractive projects across Singapore available for selection.

It is also the right time for the authorities to start looking at increasing the supply of EC sites to ensure sufficient opportunities for more Singaporeans to enjoy lifestyle living at affordable prices in the future.