Are executive condominiums (EC) worth it? We have seen many ECs gaining profits of above $700,000 to $1,300,000 that made the news. ECs is a housing scheme introduced by the government to bridge the gap between public and private housing. The price point is sat in between HDB and the private market. ECs are for Singaporean Citizens (SC) or Permanent Residents (PR) who meet the eligibility criteria, such as income ceiling of $16,000 and family nucleus requirements. ECs do have a minimal grant of $30,000 subjected to suitable criteria.
Generally, ECs are 99 years leasehold and the buyers must stay in the EC for 5 years before they are able to sell off the property. That being said, the EC is still a half-privatised development after 5 years and they can only sell to a limited pool of buyers until the EC have reached 10 years where they become fully privatised.
However, is there a catch for ECs? In today’s market, an average 3 room new EC is priced at $1.3 million. For the average couple with $12,000 monthly income, their maximum loan is looking at $690,121 and the max property value is $920,161 under a 4.75% stress test. For a couple to be able to afford a 3 room, they will need $609,879 cash/CPF for the downpayment. The amount of Cash/CPF required for downpayment is much higher due to the Mortgage Servicing Ratio (MSR).
The same couple will be able get a max loan of $1,265,223 for private properties/New Launch and the max property value is $1,686,964 under a 4.75% stress test. For a private property of $1,686,964, the cash/CPF outlay is much affordable at $475,689. With that being said, the timeline for exit strategy is much faster compared to an EC. A private property is able to exit freely after the 3 years Seller Stamp Duty (SSD) period. While an EC can only be sold to a selected pool of buyers after 5 years and only opens up to foreigners after it has reached 10 years.
Ultimately, what would you have chosen if you were the couple? An EC with potential ultra high returns while undertaking a higher downpayment and a longer exit strategy? Or a private property/new launch with a lower cash outlay, shorter exit strategy and a substantial profit returns?
