Singapore ECs are still a good proposition for buyers
The prices of new executive condos have increased, but the strong demand and limited supply will keep this market stable.
In recent years, the prices of executive condominiums (ECs), a popular segment that combines private condos with criteria for public housing eligibility, have reached record highs.
The price of new launches rose along with the demand for land and its shortage, as well as the increase in land prices.
According to data from the Urban Redevelopment Authority, the median price for new ECs will reach a new record of S$1,417 psf in 2023.
Prices have risen much more slowly than other private properties in the last five years. ECs are still comparatively affordable compared to new private homes on the market.
The median price for new ECs increased by 28.9% from S$1,101 psf to S$1,417 psf by 2023.
The median price for new landed property increased by 112.9 percent from S$1,053 per square foot to S$2,242 per square foot, and the prices of non-landed properties rose by 49.4 percent from S$1,664 per sq.ft. to S$2,486 per sq.ft. over the same time period.
EC prices growth lags behind other segments
ECs, despite being constructed by private developers, are sold for less than private condominiums. Grants are given to new ECs that are similar to those for public housing. The government privatises EC projects 10 years after completion. Units in the development are then available for foreign sale.
ECs, however, are subject to stricter buying conditions. These include eligibility requirements, minimum occupation periods (MOP), as well as specific resale criterion that are similar to those for public housing built-to-order (BTO). Buyers must be Singaporeans or married to a Singaporean permanent resident to be eligible for a new EC. Buyers are also not allowed to own other properties during MOP, and must adhere to both a mortgage service ratio (MSR), as well as the total debt servicing ratio (TDSR).
The rules on income limits and borrowing limits could explain why EC prices are growing slower than other segments. The rules are in place to make sure that more people can afford to buy properties and not overstretch their budgets.
Buyers of new ECs must comply with a 30% MSR in addition to the existing TDSR. This means that borrowers are only allowed to use 30 percent of their gross monthly earnings to pay back their mortgage. EC buyers are also subject to a maximum household income.
Buyers may be priced out if EC prices increase too quickly.
Imagine a couple who earns a combined S$16,000 and wants to buy a new EC. They can only borrow up to 75% of the price of the property, which is around S$1,000,000 based on MSR and income limits.
The buyers can choose to buy a new three-bedroom EC of 1,000 sq ft for S$1.4m at S$1,400 psf. They will have to pay S$400,000 in cash, CPF or both (of which 5% of the price is payable in cash), plus stamp duties, legal fees, and other costs.
More space at affordable prices
There are very few choices for homebuyers looking for a condo that is at least 1,000 square feet in size, and costs less than S$2,000,000. In 2023, those in the market will be even harder pressed to find a unit with a minimum of 1,000 sq ft and below S$1.5million.
Last year, such units accounted for 32.4% (122 units), of the total new EC transactions (376 unit).
In addition, 44,9% (165 units), of the new ECs sold were priced at less than S$2,000,000 but not less than S$1.5million. Comparatively, 33 units or 1.7% of all new private condos of at least 1,000 square feet were sold in this price range by 2023. 88 percent of the new condos (1,716 units), sold at prices between S$2 and S$5 millions. The lowest priced units for new landed property were at least S$3million last year.
Profit potential
Our analysis of resale profits shows that the majority of ECs are profitable. The gains and losses of each EC unit were calculated by comparing the URA Realis sale caveats from 2007 to 2023 with the resale caveats of the same unit during the same period. Calculations do not include costs like legal fees or interest.
From a database of 28652 new ECs, 6,341 caveats were matched. Almost all ECs – 99.5% (6,338 out of 6,341) – were profitable and yielded an average gross of S$360,000 per unit.
One third of these units, or 1,307, generated gross profits exceeding S$1,000,000, with seven units surpassing this amount.
A unit in CityLife@Tampines was the highest-profited property. It was bought for S$1.91 in 2013, and sold for S$3.29 in 2021. This resulted in a profit record of S$1.38 in almost S$1.38. A unit at Esparina Residences was sold for S$1.33m in 2023, the second highest profit. The Tampines Trilliant EC was the third most profitable sale in 2023, with a gross gain of S$1,19 million.
The recent rise in EC prices has resulted in large profits at a lower cost than private condos. The CPF Housing Grant Scheme offers a subsidy up to S$30,000 for eligible buyers.
We anticipate that despite the fact that the launch price of ECs may continue to increase, resulting in lower profit margins at resale due to the limited supply, and comparatively low prices compared to private properties, the demand for ECs will remain strong in the long term.
Prices of EC products are sustained by limited supply
The current market for ECs has a shortage. Since 2014, the demand for new ECs has outpaced the number of units introduced (16,893 unit) in the last 10 years.
This year, only one EC was launched: the 512 unit Lumina Grand on Bukit Batok Avenue 5 The average number of ECs launched between 2014 and 2030 was 1,689 units. Comparatively, 4,936 units of ECs were released in 2012, and 3,750 in 2015.
Only one site, Jalan Loyang Besar, for a 710 unit EC project, will be available for sale in the near future. This is under the Confirmed list of the H1-2024 Government Land Sales Programme. The Reserve List also includes two other EC projects, which will yield 855 units. These reserve sites won’t be put out to tender until they get an acceptable offer.
Prices and demand are likely to be maintained this year due to the limited supply.
