Build more exec condos and expand the pool of eligible buyers
THE tender for an executive condominium (EC) site at Bukit Batok West Avenue 5, which closed last week, drew a top bid from City Developments Limited (CDL) of S$336 million or S$626 per square foot (psf) per plot ratio. CDL’s top bid was just 0.2 per cent ahead of the next highest bid.
For the H2 2022 Government Land Sales, the confirmed list has six sites with private residential components, which can yield about 3,505 homes, including one EC site in Tengah that can yield about 495 units.
The EC is a hybrid of public and private housing. Built and sold by private developers, ECs offer features of condominiums. A typical EC sits within a gated compound with security, and has amenities such as swimming pool, clubhouse, gym and playground.
For new ECs, there is a minimum occupancy period of five years from project completion, during which the EC unit cannot be sold or rented out whole. After five years, the said EC unit can be sold to Singapore citizens or permanent residents (PRs), or rented out whole. After 10 years, the EC unit can be sold to anyone - including foreigners - just like a private condominium.
Build more ECs
Perhaps the government can raise the supply of EC sites to meet the rise in household formation and the desire of people to live in condominiums.
The growth in the number of resident households in Singapore is outpacing the growth in the resident population. While Singapore’s resident population fell 1.4 per cent in 2021 versus 2020, the number of resident households rose 1.3 per cent in 2021 from a year ago.
Between 2010 and 2021, the growth in resident population and resident households was 5.7 per cent and 21.4 per cent respectively. Average household size among resident households fell from 3.5 in 2010 to 3.15 in 2021.
Between 2010 and 2021, the number of resident households living in HDB homes grew by 15.4 per cent, while the number of resident households living in private condominiums and apartments rose by 73.6 per cent.
As a new EC unit is priced at possibly over 20 per cent below that of a comparable new condominium unit, buying an EC unit can be a cost-effective way for people to enter private homeownership. Such cost savings matter, particularly when higher interest rates drive a rise in mortgage repayments and rising inflation eats into disposable income.
Letting private developers build more ECs may also help alleviate somewhat the pressure for the HDB to build more flats to meet rising housing demand.
As of Q2, there were 34,084 EC units, accounting for slightly over 8 per cent of the private housing stock. Perhaps there is room to substantially grow the share of ECs in the private housing stock.
Expand pool of EC buyers
Concurrently, consider expanding the pool of those eligible to buy new ECs.
Currently, buyers of EC units from a developer have to meet certain eligibility criteria. For example, couples need to comprise two citizens or a citizen and a PR, while all singles who apply under the Joint Singles Scheme (JSS) must be citizens. Applicants under the JSS must be at least 35 years old. Also, the monthly household income of buyers must not exceed S$16,000. Subject to certain conditions, buyers of EC units from a developer can get CPF housing grants.
As it stands, citizens, who are single, have to be at least 35 years old to be eligible to buy HDB flats. Singles, who want to buy new HDB flats, are restricted to buying two-room flexi flats in non-mature estates. Also, singles cannot buy HDB flats that are built under the prime location public housing model.
Perhaps letting singles below the age of 35 buy new ECs can help some younger singles get into homeownership faster without affecting existing HDB policy on flat ownership by singles.
Assisting singles in owning their own homes sooner can help them in their financial planning, and anchor them here, thereby benefiting society and the economy. Moreover, allowing younger singles to buy new ECs should not lead to more young adults opting for single-hood over marriage.
Increasing substantially the monthly household income ceiling for buyers of new ECs also merits serious consideration.
The raising of the Additional Buyer’s Stamp Duty rate in late 2021 on all buyers of homes here except citizens and PRs buying their first home has helped to remove some froth from private home prices. Also, the playing field has been tilted in favour of locals seeking to buy a private home for owner occupation.
Still, private home prices have been resilient in 2022. One may need to pay around S$2,000 psf or more for a new condominium unit in the suburbs. A new private home of around 900-1,000 square feet, which is roughly the size of an HDB 4-room flat, may cost about S$2 million.
For a household with total annual income of S$250,000, who are ineligible to buy a new EC unit, a S$2 million home is 8 times the annual household income. Some households may view such an affordability ratio with concern.
Consider giving all or nearly all citizens a bite at buying a new EC unit, by having a very generous income threshold or none at all, to expand the housing options available to citizens.
Singapore has a high level of homeownership, which helps anchor locals to home and gives people a stake in Singapore’s prosperity. Helping many people own new HDB homes, including HDB homes in prime areas, is critical. But, as new HDB homes are subsidised, there are necessarily restrictions to ensure scarce resources are used optimally.
Home buyers who cannot get a flat directly from HDB may deserve more help. Consider making it easier for some of these buyers to buy new EC units. Developers may raise selling prices of new ECs if more high income earners are eligible to buy such units. But, this can be mitigated by releasing more EC sites.
Build substantially more ECs and give more people a chance to own a new EC so that anxious home buyers have more choice amid rising inflation and home prices.
