Singapore ECs remain a great proposition for buyers

Limited supply supports EC Prices

Currently, the market for ECs lacks supply. The demand for new ECs (which has surpassed the number launched by 16893 units in the past decade) has increased.

Only one EC model has been launched this year: Lumina Grand, 512 units at Bukit Batok Avenue 5 The EC production this year will be less than the 1,689 ECs that were launched on average between 2014 and 2023. In 2012, there were 4,936 EC units released. In 2015, 3,750 EC units were released.

The Confirmed Listing of the Government Land Sales H1 2024 programme will soon release only one site at Jalan Loyang Besar for a project with 710 units. On the Reserve List are two more EC sites, with a total of 855 estimated units. The government will only tender these sites if the offer is acceptable.

Due to the limited availability of ECs in this year, it is likely that prices and demand will remain high.

Prices for new executive condominium launches have risen but demand is strong and supply is limited. This will keep the market steady.

Prices of new executive condos (ECs), a popular, hybrid segment combining private condos and public housing criteria, have reached record levels over the past few years.

Prices of new launch products rose alongside the increasing demand, shortage and price increases for land for EC developments.

According to the Urban Redevelopment Authority’s (URA) data, the median new EC price will hit a record high of S$1,417 psf (per square foot) in 2023.

ECs have risen in price at a slower rate than other private property over the last five-year period. They are also still a good deal cheaper than new homes.

The median price of ECs has increased from S$1,101 psf (2019) to S$1,417 psf (2023) by 28.9 percent.

Prices of new non-landed homes increased by 49.4 percentage points from S$1,664 to S$2,486 in the same period.

Buyers will be faced with high costs if EC rates rise steeply. This could lead to many being priced out.

Take a couple that has a combined income between them of S$16,000, and they are looking to purchase a new EC. The maximum amount they can borrow is 75 percent of the purchase price. This comes out to approximately S$1,000,000, based on MSRs and income ceilings.

If the buyer chooses to purchase a three-bedroom new EC measuring 1,000 sq ft at S$1.4 million, the purchaser must pay S$400,000 as cash or CPF (5 per cent must be paid cash), stamp duty, lawyer fees, and miscellaneous expenses.

Affordable pricing for additional space

The private residential market offers very few options for buyers looking for a condominium of at least 1,050 sq ft and below S$2,000,000. The market will find it even harder to find new units of at least 1000 sq ft below S$1.5million in 2023.

These units accounted last year for 32.4 percent (122 units) out of all new EC transaction (376 units).

Moreover, 43.9% (165 units), or 165 new ECs, were sold at a price of less than S$2million but greater than S$1.5million. Only 33 new units, or 1.7%, of private condos with a minimum of 1,000 sq ft were sold within this price range between 2023 and 2024. 88 per cent of new condos, or 1,716 unit sales, were sold for less than S$5million but at least S$2million. In the case of new landed properties in Singapore, the lowest-priced unit cost at least S$3,000,000 last year.

Profit potential

Our profit analysis shows that most ECs sold at a profit. Calculating the gains and losses for individual EC units was done by comparing URA Realis’ new sale caveats (between 2007 and 2023) to the resale of the unit in the same time period. This calculation excludes costs such as interest and legal fees.

The database contained 28,652 EC transactions. There were 6,341 matched Caveats. Almost 100% (6,338 of 6,341) of the sample ECs generated a profit, with an average gross income of S$360,000.

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Seven units exceeded S$1 million. Of these 1,307 units, each unit generated a profit gross of at least S$500,000.

The unit at CityLife@Tampines that was purchased in 2013 for S$1.91m and resold in 2021 for S$3.29m, yielding almost S$1.38m, is the one with the highest profit. The unit at Esparina Residences that was resold in 2023 for S$1.33million profit was the next highest. The Tampines Trilliant EC resold for a profit of S$1,19m in 2023 was the third-most profitable sale.

The recent increase in EC price has led to large gains at a relatively low cost compared with private condos. A housing subsidy worth up to S$30,000 is available for those who qualify under the CPF Housing Grant Scheme.

Despite the fact that EC launch prices are likely to continue to rise and result in smaller profits on resale in the future, we expect demand to remain healthy over the long-term due to their limited availability and lower prices compared with other private properties.

EC price growth lags the other segments

ECs are priced lower than private condos despite the fact that they were built by private developers. New ECs receive grants comparable to those awarded for public housing. A project for an EC is privatised ten years after it has been completed; units can then be sold to foreigners.

ECs have more restrictive conditions for buying, such as eligibility requirements and minimum occupancy periods. They also have specific resale standards that are similar with public housing units built-to-order. For ECs, the buyer must either be a Singapore citizen or a Singapore citizen married to a resident permanent. The MOP also prohibits buyers from owning other properties and requires them to adhere to a Mortgage Servicing Ratio (MSR) as well the Total Debt Servicing Ratio (TDSR).

It is possible that the income and borrowing ceilings, as well as the limits on loans, are a reason for EC’s slower price growth. These rules were put in place so that properties would be accessible to a wider range of people, and they wouldn’t end up exceeding their budgets.

The MSR is 30 percent for eligible EC buyers, on top of existing TDSR regulations. Borrowers can only use 30 percent of gross monthly income as a repayment method. ECs must also be purchased within a certain income range.

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