For most of us, upgrading to a condo is the ultimate property goal. However, given the cooling measures announced last December, many may find that doing so may not be as financially viable.
Measures announced include raising the Additional Buyer’s Stamp Duty (ABSD) for Singaporeans buying a second property from 12% to 17%. The Total Debt Servicing Ratio (TDSR) has also been lowered from 60% to 55%.
Still, this doesn’t mean all hope of achieving that dream is gone. A good option is to go for an Executive Condominium (EC).
The thing about ECs is that they’re designed for the sandwiched class. It’s not just for those who bust the BTO income ceiling, but also for those who want to upgrade from an HDB flat, but find that buying a condo is too expensive.
ECs are a public-private hybrid housing. They’re built by private developers and come with condo facilities, allowing residents to enjoy condo living at a fraction of the cost. This is because new ECs are subsidised by HDB. Grants are also available for those who are eligible.
On the other hand, they’re generally located in the suburbs (and generally far from the MRT). Other caveats include meeting certain HDB requirements, such as a five-year MOP and a limited pool of buyers when they are allowed to be resold five years later.
But once they’re privatised 10 years after the TOP, they’re no longer subjected to these HDB requirements. They can also be sold to foreigners, as they’re considered condos.
And with the recent cooling measures, we think ECs are becoming a more attractive option to consider these days.
No ABSD to be paid upfront
Just like owning an HDB flat, when it comes to buying a new EC, you’re not allowed to own any other properties. You’ll have to dispose of it at least 30 months before you can buy a new EC.
But if your current property is an HDB flat or EC bought from a developer, you don’t have to dispose of it before buying a new EC. Even though this means that you own two properties, you won’t be subjected to ABSD. So if you’re buying a S$1 million EC, you can save S$170,000 in ABSD.
Just like buying another HDB flat, the ABSD remission will be automatic upon HDB’s approval of the EC purchase.
Take note that you’ll still have to dispose of your flat within six months after collecting the keys to your new EC.
Technically, you can still get this ABSD remission if you’re selling your flat within six months to upgrade to a condo. But this option can be more of a hassle and financially-draining, as you have to pay the ABSD upfront first, before applying for the remission to get the money back later. And with the higher ABSD rate, you’ll have to fork out more money for it.
However, by buying an EC instead, you don’t have to deal with the ABSD at all, saving you some cash and CPF savings.
Lower supply available
There are not a lot of new ECs available right now. As of Q4 2021, there are only 1,985 unsold units in the pipeline.
Currently, the new launch ECs are:
- Ola
- Parc Canberra
- Parc Central Residences
- Parc Greenwich
- Piermont Grand
- Provence Residence
A quick check on URA Realis database shows that out of these projects, as of February 2022, only Ola, Parc Greenwich and Provence Residence have unsold units.
The other projects have all sold out their units.
The low number signals the high demand ECs have, making it even more attractive to own one. This also means that prices will increase, given the high demand and limited supply. Despite this, prices will still be relatively lower than condo prices.
Upcoming ECs this year include North Gaia in Yishun, which should be launching soon, as well as the Tengah Garden Walk EC.
We think North Gaia will be an exciting one to watch, given that this will be the first new EC in Yishun after The Criterion hit its TOP in 2018. It is also located right next to Sungei Khatib Bongsu, providing residents with scenic views of the park and river.
Higher appreciation as compared to condos
Although ECs are considered to be less premium than condos, interestingly, ECs in general have seen higher price appreciation than condos.
Over the past 15 years, ECs have experienced a higher price appreciation of 148.96%, more than twice as compared to 59.88% for condos.
Here’s a closer look at the price increase when we compare new launch ECs and new launch condos.
Over the past 15 years, prices of new ECs have risen by 142.14%, as opposed to 61.95% for new condos.
Likewise, the price increase for resale ECs is around two times the price increase for resale condos at 144.12% vs 72.47%.
The higher price increase may be due to ECs becoming fully privatised after 10 years, achieving the condo status and no longer restricted to HDB’s requirements. At the same time, it also means that by buying an EC, you can expect higher price appreciation for your unit in future, even though you paid a lower price for it.
Given the latest round of cooling measures, would you buy an EC or condo? Let us know in the comments section below or on our Facebook post.
If you found this article helpful, 99.co recommends 6 New Launch Executive Condominiums (Updated 2022 List) and How different properties performed in Q1 2022 after 16 Dec’s cooling measures.
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