Why executive condos still stand out in today’s market
Even as EC prices rise, the hybrid housing segment is compelling with its affordability and potential for capital appreciation
THE executive condominium (EC) housing concept is unique to Singapore. Introduced in 1995, the model was designed to “satisfy the demands of those who aspire to own private property but cannot afford to do so”, in the words of then-prime minister Goh Chok Tong.
For Singaporeans, the EC presents an opportunity to enjoy the benefits of private property ownership – the prestige, privacy and facilities associated with a private condo – but at a more accessible price point. To balance cost and affordability, many new EC projects are located in young housing estates.
That said, there are several catches. EC buyers are subject to a monthly household income cap of S$16,000 and a mandatory Minimum Occupation Period (MOP) of five years. After fulfilling the MOP, owners can only sell their ECs to Singaporeans and Singapore Permanent Residents.
ECs can eventually be sold to foreigners after they become fully privatised after 10 years. This degree of resale flexibility is a significant reason why ECs are popular among first-time buyers.
Most EC purchasers fall within the monthly household income bracket of between S$14,000 and S$16,000. This group of buyers is not eligible to buy Build-to-Order (BTO) flats, and has to either explore the HDB resale market or private property.
First-time homebuyers have a further advantage – they get priority allocation for their EC purchase.
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Given their price point compared to private homes, many EC projects saw strong sales during their launch. Recent launches, such as Altura and Lumina Grand, achieved 61 per cent and 53 per cent sales respectively over their launch weekends.
Over the years, EC owners have continued to reap handsome profits, benefiting from rising home prices. For EC projects completed in 2013, owners who sold after five years achieved a median gross profit of S$142,000. In contrast, owners of EC projects completed in 2019 who sold at the five-year mark saw a remarkable median gross profit exceeding half a million dollars.
Rising land cost and EC prices
While past EC owners have clearly benefited from significant capital appreciation, the landscape is changing as new EC prices too rise.
Amid rising land costs for ECs, driven by both their popularity and limited land sales with only two to three plots released each year, developers are presented with a unique challenge.
That is, to price their offerings within an affordable range for EC buyers, whose mortgage loan eligibility is capped by the 30 per cent Mortgage Servicing Ratio (MSR) framework and income ceilings.
Combined, these guardrails in effect limit buyers’ affordability due to the caps placed on loan quantum, and subsequently, the maximum property value that buyers can finance.
Even as EC prices continue to climb, the price gap between ECs and their closest competition – new non-landed private homes in the Outside Central Region (OCR) – has been steadily widening over the last three years as OCR prices rose rapidly.
In Q4 2021, the price gap between a new EC and an OCR new home was S$388 psf. As of Q4 2024, this difference has soared to S$710 psf. To keep the price quantum accessible, developers have focused on offering more efficient layouts.
For HDB upgraders, or second-timers, there are compelling reasons to consider a new EC. Firstly, upgraders are exempted from having to pay the Additional Buyer’s Stamp Duty (ABSD), since they will need to dispose of their HDB flat within six months of receiving the keys to their new EC.
Second-timers can also take advantage of the Deferred Payment Scheme (DPS), which, although costing 2-3 per cent more, allows them to defer the balance of 65 per cent until the EC achieves the Temporary Occupation Permit (TOP). The final 15 per cent will then be payable upon the Certification of Statutory Completion. This scheme helps second-timers avoid maintaining two mortgages while waiting for the completion of the new EC.
Developing townships provide valuable exit strategies for EC owners
ECs are usually built within developing townships, providing prospective buyers with a viable exit strategy should they plan to relocate after fulfilling the MOP.
To put things into perspective, there have been five ECs launches in the Tengah and Bukit Batok planning areas, with the most recent being Novo Place. These EC projects are located in close proximity to the Jurong Lake District, which is envisioned as the largest business district outside the Central Business District over the next decade. Buyers could gain a first-mover advantage from the major changes to come in the future.
Additionally, since these ECs are located near the new Tengah estates, there is a large captive pool of HDB upgraders to tap.
New EC or million-dollar resale HDB flat?
While new ECs offer affordable options, they tend to be located on the outskirts of Singapore. In comparison, resale HDB flats in popular locations can be more attractive.
This brings us to the key question: Should you opt for a million-dollar HDB flat instead of new ECs?
To put it simply, location is the answer. The biggest advantage of resale HDB flats, and the reason that people are willing to spend upwards of a million dollars on them, is location.
And for an outlay similar to the typical entry price of an EC, a resale flat buyer would be able to purchase larger units in central or well-connected areas (five-room or executive apartments).
On the other hand, while ECs are found in locations further from Central Singapore, typically in up-and-coming housing estates, they are often within walking distance to MRT stations and will benefit as the neighbourhood infrastructure grows and mature.
Another important consideration will be that resale flats come with shorter lease tenures. This will limit the loan-to-value limits and loan tenures, whereas new ECs come with a fresh 99-year lease. Buying older flats may also come with hidden renovation costs or poorly maintained external facades.
Eugene Lim is key executive officer, and Wong Shanting is head of Research and Market Intelligence at ERA Singapore
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