The Sumang Walk Executive Condominium (EC) site has had everyone’s attention the past few weeks. Having attracted a record $509.37 million bid from developers, it’s likely that the eventual condo will be one of the most expensive in the area. The estimated breakeven price, when the developers start selling, will very likely be above $1,000 per square foot. This could make it the first million dollar EC site in the area. That’s already affecting the way buyers perceive some other properties
Soon-to-be launched Rivercove Residences looks good by comparison
As some Internet conversations are showing, the prospect of a million dollar EC has caused some buyers to roll their eyes. Rivercove Residences (launching 1 April 2018) is often singled out as an alternative: Why buy the Sumang Walk EC for a minimum of $1,000 per square foot, the argument goes, when Rivercove Residences is likely to be more attractively priced?
The fact is, just about every other EC starts looking like good value for money, when you mention Sumang Walk EC. This is especially the case for older, appreciated ECs – some of these have appreciated to around $1,100 per square foot by now, with the added advantage that they are closer to privatisation (ECs are fully privatised after the 10th year).
We might be turning back the clock
Remember 2012? At the time, EC prices got so high that then Minister of National Development, Mr. Khaw Boon Wan, stepped in to send a sharp message to developers.
At the time, an EC penthouse at Heron Bay sold for $1.77 million; and there was a presidential EC penthouse in Tampines that sold for $2.05 million (it was bought by a “typical middle class family”. Really, that’s what they told the newspaper).
At any rate, this caused Mr. Khaw Boon Wan to warn developers “not to forget the fundamental premise of an executive condominium”, while they were busy trying to see just how much buyers would pay.
Then, as now, ECs are an exciting concept – buyers can still get CPF grants, so it’s often seen as “subsidised private housing”. During the upswing in the property market (which would peak in 2013), it was clear buyers would pay crazy sums, and developers were happy to accommodate that.
With Singapore’s property market recovering, and the income ceiling on ECs raised to $14,000, we may see a repeat event.
A matter of time before older condos (whether they’re ECs or not) also see some price hikes
If ECs are going to start reaching the million dollar mark, a large segment of buyers are going to decide, what the heck, they may as well buy full-fledged condos that are available for that price. As such, some suburban condos in the $1 million to $1.2 million range may be seen as viable alternatives (see point 1: the price is about the same, and these condos are already private).
This won’t last forever. Over time, the prices of those full-fledged condos are going to creep up. A lot of it will also be due to sellers’ mindsets (i.e. how can my private condo only be worth as much, or less, than your EC?)
We will have to start reassessing the notion that ECs are always a good investment
If you’re buying an EC for a home, don’t worry about this bit. But if you’re thinking of your EC as an investment, it may be time to question the underlying assumptions.
Yes, an EC is theoretically a great deal, as it’s private property that comes with CPF grants. But given how inflated the prices are becoming, are you certain there’s still room for appreciation? There’s certainly more risk involved, given the bigger cash outlay* and increasingly steep prices. If you have a million or more to spend, a full-fledged condo may be a better investment.
(You can find great condos prices at just $1 million to $1.2 million, using the price filter on 99.co).
*There are no HDB loans available for ECs. You must use a private bank loan, which can only finance up to 80 per cent of the property price or value (whichever is lower).
Find the home of your dreams today at Singapore’s largest property portal 99.co!