Rising new executive condominium prices a concern for buyers: PropNex survey
Suggestions to improve affordability include raising the monthly household income ceiling, adjusting the mortgage servicing ratio upwards, and increasing EC land supply under the GLS Confirmed List
FIFTY-FIVE per cent of HDB flat owners who took part in a survey by real estate agency PropNex said prices of new executive condominiums (ECs) were unaffordable or extremely unaffordable.
The homeowners were among nearly 1,250 respondents polled by PropNex between March and April 2024 on the relevance of ECs in meeting the housing aspirations of middle and upper-middle income families in Singapore who wish to own a private home.
URA Realis caveat data showed the median transacted unit price of new EC units rose substantially in the last few years from S$798 per square foot (psf) in 2017 to S$1,417 psf in 2023. In the first half of 2024, the median unit price of new ECs exceeded the S$1,500 psf mark.
Ismail Gafoor, chief executive officer of PropNex Realty, said: “To this end, perhaps the government can consider tweaking some policies that could help to improve the affordability of new ECs. They could include raising the monthly household income ceiling beyond the present S$16,000 for couples or families, or adjusting upwards the mortgage servicing ratio (MSR) from the current 30 per cent, seeing that prices of new ECs have increased in recent years.”
Another suggestion that was supported by many respondents was the raising of EC land supply under the Confirmed List of the government land sales (GLS) programme, Gafoor said.
Despite the concerns over affordability, 44 per cent of the respondents in PropNex’s survey either agree or strongly agree that ECs are still relevant in catering to the private housing aspirations of households.
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Gafoor said: “ECs continue to be popular with homebuyers in Singapore, and new EC projects generally tend to see stronger sales at launch compared with other private condo launches owing to their more affordable pricing.”
Twenty-eight per cent of the respondents said they have a monthly household income of below S$5,000 per month, while 38 per cent of them earn between S$5,000 and S$10,000 a month. Another 22 per cent earn a monthly household income of S$10,001 to S$16,000, while 12 per cent of the respondents rake in more than S$16,000 in household income per month.
Some 55 per cent of the respondents said that the monthly household income ceiling of S$16,000 for new ECs should be revised while the rest of the respondents felt that the current income ceiling is appropriate.
At the prevailing household income ceiling of S$16,000 per month, prospective EC buyers would be able to obtain a bank financing of about S$909,000, based on a MSR of 30 per cent, an interest rate of 4 per cent per annum and a 25-year loan tenure. Factoring in the bank loan amount, it would still leave a shortfall of about S$295,000 to be paid, based on the median price of ECs from January to May 2024 of about S$1.5 million.
The down payment and shortfall would come up to nearly S$600,000 – which the EC buyers have to pay in a combination of cash and money from their Central Provident Fund (CPF) accounts.
PropNex said: “This is a substantial sum for many couples, and may put new EC units out of their reach if they do not have enough savings or access to financial help from family members.”
Survey findings showed that 52 per cent of the respondents felt that the MSR should be revised for EC purchases, while 48 per cent of those polled said it should remain at 30 per cent.
Wong Siew Ying, PropNex’s head of research and content, said: “Naturally, there will be concerns on the potential implications of such policy changes. For example, the adjustment to the monthly household income ceiling could lead to more higher-income buyers entering the market and may inadvertently crowd out households who earn less. Buyers may also be worried about the likelihood that some developers could seek to take advantage of the higher income ceiling and higher MSR by raising the selling price of ECs.”
Another way to improve EC affordability is to inject more supply of such homes to cater to healthy demand by releasing more EC sites on the Confirmed List in the GLS programme, Wong said.
In the last few years, the government has released around two Confirmed List EC sites for tender each year, leading to stiffer competition for such sites among developers which contributed to higher land bids, PropNex said.
“By ramping up the supply of EC sites – possibly to four Confirmed List plots per year – it could potentially help to rein in land bid prices by developers,” the agency added.
At the close of a tender last week, an EC site in Pasir Ris fetched a record high land price for ECs at S$557 million or S$729 per square foot per plot ratio (psf ppr). It came from CNQC International (the parent company of Qingjian Realty), China Communications Construction Company and ZACD.
Meanwhile, a joint venture between Kheng Leong, the private real estate arm of the family of Wee Cho Yaw, and builder Low Keng Huat placed the top bid of S$279 million or S$793 psf ppr for a land parcel at Canberra Crescent for a condominium.
This was only about 10 per cent higher than that of the most recent EC sold before that. A Tampines EC site went to the Sim Lian Group in October 2023 for S$543.3 million or S$721 psf ppr.
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