In July 2017, Hundred Palms Residences made history by becoming the most oversubscribed executive condominium. Over 2,700 applications were made for 531 units, causing the whole development to be sold out in just seven hours.
Hereโs why executive condominiums keep topping the demand list for Singaporeans:
1. Executive condominiums are still the best value buys
ECs are a hybrid of public and private housing. This sort of โsandwichโ class properties have traditionally done well, such as the DBSS flats and maisonettes of the past. The reason is simple: theyโre a chance to buy private property, while still getting government subsidies.
Also, ECs often feature the same range of a facilities offered by private condominiums, but at a fraction of the cost.
Consider this: a typical 5-room HDB flat can costs between S$500,000 and S$800,000 (or even up to S$877,000, as we’ve seen for a 5-room flat at an August 2022 BTO project in Ang Mo Kio). On the other hand, mass-market suburban condos can easily hit the S$1.3 million mark.
Now HDB flat buyers have an income ceiling of S$14,000 per month. Consider a family that makes a little more than that, say S$16,000 a month (the income ceiling for new ECs). They get to choose between an EC and a private condo.
If this family were to buy a S$1.3 million private condo, with a 25-year loan at around 4% interest per annum*, the monthly repayment would be S$5,146 per month.
However, they can buy an EC with comparable facilities, at around S$1 million. After deducting the CPF housing grants of S$30,000, theyโre looking at a total purchase price of S$970,000.
Using the same 25-year loan at 4% per annum, the familyโs monthly repayments are just S$3,840 per month. An extra S$1,300 savings a month can make a big difference, especially for newlyweds having their first child.
And this comes without any loss of quality, as executive condominiums are full-suite condos built by private developers.
*The maximum loan quantum is 75% of the property value.
2. Resale price gaps are closing between executive condominiums and private condominiums
Initially, there were complaints that the resale value of an EC would be lower than that of private condos. However, the gap has narrowed over the years.
In addition, given that ECs are bought with government subsidies and at generally lower prices than nearby private properties, there is significant room for capital appreciation.
Executive Condos (ECs) for sale
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3. The โdrawbacksโ of executive condominiums are completely irrelevant to most buyers
Most Singaporeans buy their condo to live in, not to rent it out or flip it for profit. As such, the drawbacks of an EC are meaningless to them.
To an owner-occupier, it doesnโt matter if they canโt sell or rent the unit out during the five-year Minimum Occupancy Period (MOP), as theyโre going to live in it anyway. The 10-year wait for privatisation is likewise irrelevant to most owner-occupiers; by the time theyโre ready to upgrade or move again, itโs likely that the 10-year period will already be up.
Again, this makes ECs the equivalent of a cheaper and subsidised private property, with no discernible drawbacks.
4. Interest rate hikes have happened, and the market has decided theyโre tolerable
Prior to 2016, a common worry about ECs was how buyers had to use bank loans for them (there are no HDB loans for ECs). This led to worries that a spike in the interest rates could make mortgages less affordable.
True enough, rates have risen in 2016, 2017 and they’re still set to increase further โ the low-interest environment that lasted from 2008 has ended. We wonโt go into details here, but suffice it to say in 2008/9 you could find home loan rates as low as 1.4% per annum, whereas theyโve now risen to about 4% per annum.
However, the market has adapted to it. Banks have been providing home loans pegged to fixed rates and board rates, in which mortgages are not pegged to the rising Singapore Overnight Rate Average (SORA), at least for the first few years. Most importantly however, weโve been through a number of interest rate hikes in the past year, and the market seems to have decided theyโre tolerable after all.
Contact 99.co’s mortgage broker to get the best rates!ย
The use of bank loans is now less off-putting to EC buyers than they were before. Although we should point out that, due to the need for bank loans, EC buyers must fork out at least 5% of the property price in cash.
Looking for other public housing options? Why not consider jumbo flats and HDB terrace flats?
Are you looking to buy an executive condo? Let us know in the comments section below.
If you found this article helpful, 99.co recommendsย Has the price gap between private and executive condominiums changed? and Why itโs more attractive to buy an EC post cooling measures.
About Ryan Ong
Looking to sell your property?
Whether your HDB apartment is reaching the end of its Minimum Occupation Period (MOP) or your condo has crossed its Seller Stamp Duty (SSD) window, it is always good to know how much you can potentially gain if you were to list and sell your property. Not only that, you’ll also need to know whether your gains would allow you to right-size to the dream home in the neighbourhood you and your family have been eyeing.
One easy way is to send us a request for a credible and trusted property consultant to reach out to you.
Alternatively, you can jump onto 99.coโs Property Value Tool to get an estimate for free.
If you’re looking for your dream home, be it as a first-time or seasoned homebuyer or seller – say, to upgrade or right-size – you will find it on Singaporeโs fastest-growing property portal 99.co.
Meanwhile, if you have an interesting property-related story to share with us, drop us a message here โ and weโll review it and get back to you.
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