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What is an Executive Condominium?
Executive Condominium, also known as Executive Condo or EC is a very popular public-private housing hydrid model. This model is uniquely found in Singapore and has been around since the 1990s.
The Housing & Development Board of Singapore (HDB) came up with Executive Condominiums to cater to the needs and aspirations of the ‘sandwiched class’. You may find yourself in this situation where your earnings exceed the income ceiling for HDB flats but may feel yourselves financially stretched to buy a private property. ECs are heavily subsidised by the government, whilst also having the full condo facilities vs private condos. Thus EC new launches are very sought-after, whenever new EC projects are available. A big reason for this robust demand lies in their affordability, being much cheaper than private condos. Former National Development Minister Khaw Boon Wan had once compared ECs vs private condo as: it’s like buying a Lexus at the price of a Corolla.
What are the Eligibility Conditions & Schemes of an EC?
ECs have its prime advantages but are also tied to some conditions. First, let’s understand the Eligibility Conditions & Schemes for ECs.
- All applicants need to be at least 21 years old (35 years if you’re applying under the Joint Singles Scheme)
- One of you must also be a Singapore Citizen, with at least one other applicant being either a Singapore Citizen or Permanent Resident.
- Combined gross monthly household income cannot exceed $16,000
- You’re required to fall under one of the following HDB eligibility schemes:
- Public Scheme
- Fiancé/Fiancée Scheme
- Orphans Scheme
- Joint Singles Scheme
- You cannot own non-HDB property (overseas or locally), or have disposed of such property within the last 30 month.
- You cannot own/have owned more than 1 of the following: (i) flat bought from HDB; (ii) EC/DBSS flat bought from a developer; or (iii) HDB resale flat bought with a CPF Housing Grant.
- You haven’t met the minimum occupation period on your current subsidised flat. If it’s an executive condominium, you’ll need to wait a further 30 months from its date of disposal, before you can apply for a new one.
- For divorcees – for 3 years from the date of divorce, only 1 party of the divorce can own a subsidised flat.
- If you have previously cancelled an HDB application or terminated the Sales & Purchase Agreement (S&P) for a DBSS flat/EC using a CPF Housing Grant, you’ll be barred for 1 year or 5 years respectively.
What are the Limitations of an EC?
The limitations of being a hybrid development, is that Executive Condominiums are considered HDB properties for the first 10 years, which means they’re bounded by HDB’s rules.
There is the need to fulfil the 5-year Minimum Occupation Period (MOP) during which an Executive Condominium owner will not be able to lease or sell the unit. After the MOP period, the unit can be resold to Singaporeans, and an EC project is only fully privatised after 10 years, meaning that they can also be sold to foreigners. ECs are also bounded by HDB’s various eligibility schemes, HDB’s selling restrictions and the resale levy (if you’re buying it from a developer).
Once ECs hit their 11th year, they will be privatised – and that is when they truly shine; because now you can sell it to a bigger pool of buyers.
Let’s take a look at the pros and cons of buying an EC:
What are the Pros of an EC?
- New ECs are eligibible for HDB housing grants (for First Time Buyers)
One of the key upsides of Executive Condominium is that you will be eligible for CPF Housing Grants, which can defray some costs.
There are two types of grants available for ECs:
- Family Grant
- Half-Housing Grant
A key consideration (other than being a first-time buyer) is that your gross monthly household income has to be $16,000 and below. Apart from that, your citizenship and housing status (i.e. if a co-applicant is a second-timer) matters too.
Below is a table of how much you can get from the Family Grant and Half-Housing Grant:
2. The Price of Executive Condos is Lower vs Private Condos
Comparing the median unit price trends of new ECs and newly launched non-landed private homes in the Outside Central Region (OCR), data showed that ECs were nearly 39% cheaper than mass market condos in 2020. Even though prices of ECs started to climb from 2017, due to higher land cost, they are still considerably more affordable than private condos. At the time of writing, Executive Condominium prices typically trend around the $1,100 psf plus range.
In pricing ECs, developers are sensitive to the rule that the buyers’ salaries must not cross the monthly household income ceiling of $16,000. EC buyers are also subjected to a 30% Mortgage Servicing Ratio (MSR). The MSR refers to the portion of the buyer’s gross monthly income that goes into servicing all property loans. Together, the income ceiling and the MSR will affect affordability of ECs – set too high a price and the developer risks pricing many potential buyers out of the market. These conditions also help to keep EC prices fairly stable.
3. Good value and potential appreciation
When you buy an Executive Condominium, you’re buying a condo that is subsidised by the government.
This means that you are not only buying it at a slightly lower price, but you will also get to enjoy facilities typically found in condos such as swimming pools, tennis courts, BBQ pits, function rooms and gyms. ECs also come with fully equipped kitchens and bathrooms, as well as finishings that are comparable to private condos.
On top of that, you can also take advantage of the CPF Housing Grants mentioned earlier, which are helpful to offset the cost.
Executive Condos and Capital Gains are often linked to each other. Of the Top 5 EC resale transactions by quantum in 2020, two deals at Bishan Loft fetched more than $1 million in profits for their owners. A unit on the 25th floor was resold for $1.75 million in April, turning in nearly $1.1 million in capital gain after a holding period of about 19 years. Meanwhile, the owner of a 15th floor unit at Bishan Loft took in more than $1.1 million in profits, after selling the property in November. A couple of owners at The Tampines Trilliant booked capital gains of over $530,000 with a relatively short holding period of about eight years.
4. ECs are privatised after the 10th year
Remembering that ECs are heavily subsidised by the Government and the CPF Housing Grants you can get, the value of ECs hold well.
Even though Executive Condos become privatised in 10 years, once the 5-year MOP is met, you can sell it to Singapore Citizens (SC) or Singapore Permanent Residents (PRs) or rent it out. On the 11th year, you can sell your Executive Condominium to foreigners, which expands your pool of buyers.
5. Executive Condos are designed for own-stay purpose
Because the developers understand that the buyers of ECs are owners-occupiers, they design ECs with 2-5 bedrooms and with generous good size and layout.
What are the Cons of an EC?
1. ECs are bounded by HDB’s rules for the first 10 years
As ECs are subsidised by the government and they allow CPF housing grants usage, there are binding rules such as the 5-year MOP, where you’ll need to reside in your home for five years before you can sell/rent it out (only to SCs and PRs). Note that the MOP period only begins once the development receives its Temporary Occupation Permit (TOP).
In addition, you’ll also need to meet the other rules, including the income ceiling cap, the property ownership rule, resale levy rule, and the various eligibility conditions, mentioned above.
2. Executive Condos are usually located in the OCR
The locations of ECs are usually outside of the city, in towns like Punggol, Sengkang, Tampines, Yishun, Woodlands, Choa Chu Kang and Sembawang and more. This is because to keep prices low, the government tends to build Executive Condominiums on a low land price site. ECs are generally not near MRT Stations, with the rare exception of some, such as Provence Residence EC, which will be near Canberra MRT Station.
3. For financing, you can only apply for a Bank Loan
To finance your Executive Condominium, you will have to get a bank loan from a bank or financial institution as ECs are not eligible for HDB Loans.
When the bank calculates your bank loan, they will refer to the Loan-To-Value (LTV) ratio is 75%. LTV refers to the ratio of the maximum amount you can borrow from the bank. 75% will be calculated against the property valuation or price (whichever is lower).
For instance, if you are purchasing an EC for $1 million, you will have to take note of the 5% Booking Fee (which is $50,000) which must be paid in Cash. The remaining 20% (which is $200,000) can be paid in CPF and/or Cash.
What are the EC launches for 2021?
Parc Central Residences EC
Provence Residence EC
Every year, there are very limited Executive Condominium launches. In year 2021, there were only 3 EC launches: Parc Central Residences EC, Provence Residence EC and Parc Greenwich EC.
How can you go about owning an EC?
Above all, Executive Condos are a growing asset class of its own, with positive upsides and with subsidies from the Singapore Government and potential capital gains, they have become very popular. I have often seen ECs crossing a new benchmark in their launch day sales. How can you get maximum gains from an Executive Condominium? That is to ensure you submit your ballot ticket, and purchase the EC on the Launch Day itself, where the prices will be the lowest. We will help you throughout the whole process, ensuring your asset planning is done properly. We will advise on choosing the right unit to get maximum investment value and analysing the exit strategies. Most importantly, we want to help you get your dream home. Contact Us now to know more.