The prices of private condominiums have hit new highs in recent times. Today, it will not be unheard of to see private condominiums launching at $2000 psf or more for OCR projects. This price used to be exclusive to CCR projects in D9,10,11. It is fast becoming the norm for new launches in areas like Ang Mo Kio and even Yio Chu Kang.
While prices may be on the higher side for private property, there are still bright spots that can deliver significant returns, beat inflation, and lower risks than a typical private home.
Resale HDB and Executive Condominium (EC) have also risen in tandem. While Resale HDB prices may be capped as it is considered public housing, EC is uniquely positioned.
What are Executive Condos?
Here are reasons why EC could be your next "Pot of Gold."
1) LOWER ENTRY PRICE
Launched at a considerably lower price than private properties due to their initially hybrid status, its price appreciates as similar private developments once MOP is over. Over the past decade, EC has seen their asset price growth to be on par with private condos with a growth of 54% vs 56% in private condos.
The main consideration here is that EC has a lower quantum compared to similar-sized private condos. This gives it an edge with a lower capital outlay than private condos.
3 Bedroom Private Condo in OCR
Price : $1,800,000
Initial Price outlay ( 25%) : $450,000
3 Bedroom Executive Condo
Price : $1,150,000
Initial Price outlay (25%) : $287,500
2) 100% TRACK RECORD
Out of 27 Executive Condos that TOP since 2013, 27 out of 27 EC have shown capital appreciation with MOP 5-year Median PSF with average capital growth of 29% compared to their launch prices.
3) NO ABSD
One of the main differences between a private condo and an EC for an upgrade would be the ABSD. For upgraders to private property, if one chooses to retain the property and only sell on TOP of the new property, ABSD has to be paid first (within 14 days of signing the S&P). . If the upgrader were to avoid ABSD, most of the time, they would have to dispose their current unit before making a purchase. Alternatively, they can pay the ABSD and seek a remission if the older property is sold within 6 months of TOP.
For EC, you need not pay ABSD when making a purchase. For EC, you need not pay ABSD as you are required to dispose of your home within 6 months upon TOP. The difference is that you do not need to fork out a high ABSD at the start. Moreover, you avoid the need to rent a place as you can opt to stay in your current place till the TOP of the EC. (Do note that you may need to pay for the HDB Resale levy)
In both cases, ABSD remission is subjected to certain criteria, such as the new property being deemed as a matrimony home.
ABSD is currently at 17% for second property for Singapore citizens.
4) POSSIBLE FOR GRANT
For first-timers, you can enjoy a CPF housing grant of up to $30K, depending on applicants' and occupiers' gross monthly household income.
The CPF Housing Grant for buying EC from a property developer are
Do note that this is valid for direct purchase from the developer only.
5) FIRST MOVER ADVANTAGE
Some Executive Condominiums are located at brand new estates or precincts. For example, the upcoming Copen Grant is located at the new Tengah Estate.
This presents a First Mover Advantage as it will be the first condominium built in the area. As the area develops, prices should be leaning towards the upside. While this is not guaranteed as there is no price precedence, prices for such developments are usually launched at a fraction of those in matured estates.
6) DEFERRED PAYMENT SCHEME
The deferred payment scheme allows EC buyers to put down a 20 % downpayment, with the remaining 65 % deferred unit receiving a Temporary Occupational Permit (TOP). The rest of the 15% will only be payable upon legal completion date ( Similar to private property)*
The key advantage of EC buyers opting for the Deferred payment scheme is that they need not manage two housing loans concurrently, thus offering flexibility in managing finances.
If you opt for Deferred Payment Scheme, note that the overall purchase price is usually 2-3% higher than the Normal Progressive Payment Scheme.
7) UNLOCK HDB VALUE WITH A BRIDGING LOAN
A bridging loan is available for buyers with existing HDB. You can unlock your existing HDB flat value with a bridging loan on TOP of the EC. This will help you mitigate the shortfall between loan and cash before you receive the proceeds from the sale of HDB.
8) POSSIBLE TO DECOUPLE
Unlike HDB, you are allowed to Decouple for EC after MOP. Decoupling means one co-owner transfers his/her share to the other, completely relinquishing his/her ownership. Decoupling allows a married couple to purchase a separate property without ABSD once the first property ownership is transferred.
If you intend to decouple your property, it is advisable to plan this during your purchase of the EC. Proper planning such as ownership split and use of CPF is necessary to minimize the cost of decoupling down the road.
We would suggest a meeting with our consultant to discuss before making a purchase decision.
9) EQUITY LOAN FOR FUTURE USE
An equity loan allows you to cash out of your property. These funds could be used for future investments, daily needs or emergencies. Equity loans are possible for EC once the owner passes the Minimum Occupancy Period (MOP).
An equity loan is not possible with HDB.
10) FULL CONDO FACILITIES
If you ever stepped into an EC, it would be hard to differentiate it from a Private Condo. Most EC has similar facilities such as pool, function rooms, playgrounds and security. A plus side for EC is that they average about 600 units, making them on par with mid to large-size development.
A development of this size would usually have full condo facilities. In addition, the larger number of units would also ensure a healthier transaction volume in the future. This will be beneficial for price appreciation in the longer term.
11) RARE ASSET CLASS
EC is a rare asset class that not everyone can purchase new.
To purchase a NEW EC, it does not matter if you can afford it but if you can qualify for it.
Below are the criteria for EC purchase
A family nucleus under the following eligibility schemes
Joint Singles Scheme
Must be Singapore Citizen
At least 1 other applicant must be SC or SP
Monthly household income must not exceed $16,000
Must not own or have any interest in local or overseas private property in the last 30 months.
Have bought only 1 subsidised housing
As you can see, only a selected pool of buyers qualify for EC. If you do fall into this criteria, congratulations. If you choose to take up the opportunity to own an EC, you will be on your way to the next pot of gold!
To check eligibility, do contact our consultant for a no-obligation review.
3 EC are launching in 2022.
North Gaia at Yishun has already been launched for sale, while Copen Grand (Tengah) and Tenet at Tampines (Tampines St 62) are expected to be launched in Q4 2022.
Drop us a message for the latest launch updates, developer prices, floor plans and showflat viewing.
Will EC be your next pot of Gold?
While nothing could be guaranteed, like BTO, EC gives one a second bite at the cherry. Will you take the plunge?