Buying An Executive Condominium

Buying any type of residential property is probably the most expensive ticket item in our lifetime.  Besides the primary needs of 'Owning a place called home' , the nagging questions that are probably in the back of one's mind are:

1.  Should I buy a BTO, EC or private condomimum unit?

2.  Should I Buy an EC Now?

3.  Will the new upcoming launches be more expensive than exsiting one?

Below are my personal humble opinion.  Read on and decide for yourself if you share my thoughts and whether it is the right time to consider buying one now.  

1. Should I Buy a BTO, EC or Private Condominum? 

First thing first, we need to look at the factors that could limit or determine your choice.

1. Eligibility. As BTO and EC are meant for owners' occupation, you must formed a family nucleus and meet the eligibility criteria before you can buy a BTO or EC unit. The eligibility conditions for BTO and EC are quite similar except for the difference in household income level ($14,000 vs $16,000).  The other difference is the housing scheme for single. While a single SC above 35 years of age, earning up to $6,000 per month can opt for a 2 room BTO unit in non-mature estate, you need another SC single (also above 35 years of age) to buy under the Joint Singles scheme for an EC unit, So if you are a single below 35 years of age, your choice is only limited to the private condominium or the resale market. 
   For private condominum, there is no eligibility condition, it is open to anyone who has the means to purchase. 
2. Income Level.   Next, your home options may be limited by the total gross income.  If your monthly total household income is:      
   *   below $14,000, all 3 options  (BTO, EC, private condo) are open
   *   $14,000 - $16,000, you can only buy an EC or private condo
   *   above $16,000, your only option is private condo. 
3. Location.  This is probably the most crucial consideration for home stay buyer.    However, location suitability may varies from buyer to buyer.  Some may look at surrounding amenities for transport and/or convenience, while others may consider being near to a table-topping school as important.   So if you like a particular location very much, whether it is  a BTO or EC or private condo project, you are likely to go for it (subject to your above eligibilty and income level qualification).
   
4. Budget.  Another limiting and determining factor would be your budget.   It is prudent not to overstretch yourself in purchasing a property.   Having a budget in mind can help narrrow your options (BTO, EC or Condo) and/or the type of unit choices (1, 2, 3, 4 or 5 bedrooms).   In today market, while a $800,000 budget will enable you to get a good 5 Room BTO unit, you will be stretched to find a good 3 Bedroom EC unit to your liking and be limited to a 1 Bedroom shoebox unit for private condo.   

Going further, if you still have 2 or more options open after considering all the above qualifying factors, you may want to weigh the below pro and cons to help determine the right type of home that best meet your needs.

To sum up, in my humble opinion, if you have to choose between a BTO and EC, it depend on your comfort zone.  For some, the appeal of higher potential capital gain associated with EC is compelling enough to stretch their budget.     For others, the BTO option, being 'easier on the pocket' make more sense.

It is probably easier to decide between an EC and private condo.  The chart above show a comparison of resale transactions in Punggol for recent EC (MOP met) vs Private Residentials  (TOP in 2010s).  It showed the average profit for EC being higher than private residential projects.  So unless you aspire to own a portfolio of  properties as investment within the next 5 years, the choice should be obvious.  The 'subsidised housing cherry' is there for you to pick. If you don't pick it now, you may not have another chance if your household income exceed the ceiling threshold.  Besides, once you own a private property, coming back to public housing is difficult  because even if you are still eligibile and had sold off your private property, there is time bar of 30 months before you can apply to buy a new unit from HDB.   

2. Should I buy an EC Now? 

To buy an EC now or later depend primarily on individual needs. 

a.  If you need a roof and/or to start your family asap, you should start looking now   Project completion date will be high on your priority list; the earlier you decide the more choices of units you have.

b.  If the current launches are not in the locality of your choice and you can wait for another couple of years,  keep an eye on upcoming launches and Government Land Sales sites for EC.  (Text me if you need any help in monitoring and/or the probability of an EC sites in your desired locality)

c.  If you are waitng for an EC next to MRT, the chances are slim as prime land are normally reserved for private residential.  The upcoming EC project, Tenet is within walking distnace  to a MRT (Tampines North MRT), and OLA is the nearest to a LRT.

d.  If you are concern on market trend and pricing, read on to the next question (3).  

In my opinion, it is better to buy now than later.  The main reasons being an unexpected promotion/salary increment may result in the household income exceeding the threshold.  Besides regulatory guidelines may change at short notices which may impact your affordability to buy an EC unit.  Buying later may make sense in a softtening market situation or for a 2nd timer who can wait out and is on a lookout for their 'perfect' home. 

3.  Will the new upcoming launches be more expensive than exsiting one?

Your guess is as good as mine.  We can only crystal ball the future pricing trend.  However, we do know that market Demand and Supply will deterrmine pricing trend and for certainty, that there are only 3 ways prices can go in the future: 

a.  Up North.     On a macro level, with inflation driving up land and construction cost, it is not wrong to assume pricing will edge up steadily over time.  On a micro level, with locality that has better amenities commanding better price,  there is a positive correlation between the land price with unit selling price.  So knowing the land bid price can help to determine whether the next upcoming launch in the locality will be cheaper or more expensive.  

For illustration, let's look at the Sengkang area where there has been a number of EC launches spread almost evenly over the past 10 years.     From the chart below, there is a corresponding price dip in average selling price for Treasure Crest where the land bid was lower than The Vales.   Over a period of 10 years, the average selling price for new EC launches at Sengkang locality has crept up from $750 psf (Treasure Crest) to $1135 psf (OLA).

With the latest land bid for the Tengah Garden Walk EC site ($605 psf ppr) smashing the previous record ($580 psf ppr) for Piermont Grand you can probably do an educated guess where the pricing trend is heading.   

b.  Flat.   In a Supply exceed Demand situation and/or weak economy, prices will likely to stay flat.  Also the Singapore Government has been known to use cooling measure to flatten the rate of price increase.  The TDSR/MSR ruling in 2013 was probably the most effective measure that casues prices to flatten out after a sharp rise in early 2010s.     The last flattening of EC prices was during the period 2013 to 2015 (see above Sengakng EC chart) where demand was impacted by the TDSR/MSR ruling, and there are around 10 EC projects in the market resulting in The Vales being launched at the flatten market price despite its higher land cost.  

Since the COVID pandemic in early 2020, home pricing has risen over the past year.  The probability is high  that we may see another round of Goverment cooling measure and subsequent flatening of prices as in the mid 2010s.   The lingering unknown is "Will the new pricepoint after flatening be higher than current price?"       

c. Down South.   Price will likely head south if there is an internal/external shock to the market and/or a prolong recession.  This last "Down South" situation for EC was in the early 2000s where the economy is fragile after the 911 attack and SARS.

Going forward, in event that EC prices do actually head south, there is actually less to fear in buying an EC unit as compared to a private condominium. The reasons being:

• There is already a pricing differential buffer of about 15 – 30% compared to similar private condominium around the vicinity. The pricing buffer is higher for applicants who are eligible for the CPF housing grant.  
• EC are meant for owner occupation and any pricing dip would not be as great as  in private condo.  In addition, the minimum occupation period of 5 years is actually a blessing in disguise. It effectively helps to ensure no similar unit from the same project will be in the resale market during the construction plus MOP period (8 years), lowering the risk of margin calls from the bank.  
• On the other side of the scale, the Singapore Government also has an interest to ensure pricing do not fall steeply.  In the early 2000s "Down South" situation, the Executive Condo Housing Scheme program (ECHS) was suspended in 2003 and revived later in 2010 when prices start to surge after the sub-prime crisis.    In today situation, the Government may turn 1 or more of its cooling measures into 'stimulating measures' to moderate any prices fall.  

Like stock market, what goes down will eventually comes back. It is just a matter of time before prices turns upward.  The  upturn may happen by the time your unit is fully privatised.   Looking back at history, those who bought  EC around the late 1990s' peak and holding it through the early 2000s' bottom is now laughing to the bank. Their privatised unit can now be sold at a healthy profit.

In summary, property is a long term investment. In land scare Singapore.  If buying an EC unit is within your means, the downside is minimial and you should book a unit that best meet your needs as soon as possible.  The earlier you decide, the better will be your chance to find a choice unit and called it 'home'.

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