In Singapore, private condos and their counterparts-executive condos-are among some of the most sought after types of property.  Due to their desirable amenities, design and investment potential, good private and executive condos are often quickly snapped up by enthusiastic buyers.

Owners of HDB may sometimes want to move to a private or executive condo after completing their HDB Minimum Occupancy Period (MOP).   Nonetheless, there are some factors that HDB owners need to take into account before they upgrade to either type of condo.

Here, we’ll take a look at the variations between executive condos and private condos in Singapore to help you make an informed decision.

What are the differences between private condos and executive condos in Singapore?

With the bumper supply of executive condominiums that will be launched in 2020, we will help you appreciate the differences between an executive condominium and a private condominium. Before we dive into the complexities of how both types of condo differ, here’s a quick summary of what private condos and executive condos really are.

Private residential condominiums are buildings on non-landed strata land. The residences that these private condos provide can be either freehold or on a 99-year leasehold.

Executive condos, also known as ECs, are aimed at people who have surpassed the public housing monthly income limit and do not have the financial means to buy private property. Thus these executive condos are partially subsidized by the government and start off as public housing. They will, however, become private property after 10 years. Such condos tend to have a 99-year leasehold term. Executive condos also have more restrictions surrounding their sales, such as the buyers being expected to apply under a certain scheme. The Public Scheme, Fiance/Fiancee Scheme, Orphans Scheme, and Joint Singles Scheme are included in this. Buyers may not exceed a certain income bracket, either.

Affordability

There may be some reasons why an HDB owner may be considering buying a condo in Singapore.

One reason may just be to get a better living environment and space. Another explanation might be to use the condo as an investment option. The main focus should be on you being able to afford the property in the first place, no matter the reason.

Commonly, executive condos are more affordable than private condos. This is because part of the land cost for these projects is subsidized by the Government.

As a result, most executive condos have prices that are lower than private condos by up to 25-30 per cent. However, because executive condos begin as public housing, homebuyers can take advantage of CPF Housing Grants to pay for their home.

Because of these attractive options, many Singaporeans are tempted to move to an executive condo, rather than a private condo.

Restrictions Since the first 10 years of executive condos are considered public housing, they follow the MOP rules set by the HDB.

HDB Blocks in Bt Merah
Cluster of HDB housing in Central Singapore

EC owners are not allowed to rent out the entire condo for the 5-year duration of the MOP, sell the property via the open market, or purchase some form of private property.  For those looking to profit early from their executive condo, this can be tricky.

Private properties do not have to comply with the MOP, and you can resell them whenever you wish but you need to bear in mind on the seller’s Stamp Duty, better known as the SSD. It was revised downwards from 16% to 12%. The SSD of 16% applies if you sell your private condo within the 1st year, 8% within the 2nd year and 4% with the 3rd year of ownership. If you sell after 3 years from your initial purchase exercise date, then you are not subjected to SSD.  If your goal is to rent your property to a tenant for a consistent income stream, a private condo would allow you to earn quicker rental returns. Some private condos may TOP earlier and this is definitely helpful in the servicing of the housing loan.

View from 494E Tampines
View from 494E Tampines St 43

 

Potential for appreciation

Due to the fact that executive condos are being partially subsidised by the government, you can buy an executive condo for a lower price than its actual price. As executive condos transition into private property, their value increases. This is quite commonly seen from the past ECs that has met with the 5 years MOP period.

This makes executive condos a good choice for HDB owners who are thinking of upgrading to a new home, as they are buying a property that is likely to appreciate in value. The upgrading process is also easier as the transition is less cumbersome. Buyers of ECs may also have the option of selling their HDB only at TOP and this does not attract ABSD as their 2nd property.

Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR)

Executive condos and private condos have different servicing ratios. Those who are buying executive condos have to comply with the MSR, while buyers of private condos have to comply with the TDSR.

Under the MSR, the monthly repayment for the housing loan used to buy the EC should not exceed 30% of your monthly household income. There is also a cap on the maximum loan tenure, at 30 years.

Under the TDSR, you can only use up to 60% of your gross monthly income to pay for your loans. This limit includes all your outstanding debts, such as car loans, instalment plans, and credit card payments.

Private Condo Kitchen
An open concept kitchen in a private condo

Resale levy for executive condo buyers

If you have previously bought a government subsidised property, such as a BTO, a DBSS unit, or another executive condo, you will have to pay a resale levy. This is to ensure that there is a fair allocation of public housing subsidies for government-subsidised homes. The actual resale levy amount will depend on your previous subsidised housing type.

For more details and understanding of the options as an upgrader, drop us an email or simply just give us your comments. Please bear in mind that upgrading requires precision calculations to ensure that your lifestyle is not compromised.

Jarrey Ng
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