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02-08-13, 11:51
http://www.businesstimes.com.sg/archive/friday/premium/top-stories/why-ecs-could-see-surge-demand-soon-slp-20130726
Published July 26, 2013
Why ECs could see surge in demand soon: SLP
'Unintended effects' from 3 main areas could ignite demand for that market
By ong chor hao
[SINGAPORE] A cocktail of runaway private property prices, a new government policy and supply issues could inadvertently lead to a heating up of the executive condominium (EC) market.
Property agency SLP International explored this scenario in a report sent to The Business Times.
The EC market faces such "unintended effects" from three main areas, it said.
First, more demand is being channelled towards ECs, as the growth in private condominium and apartment prices continue to outpace that of ECs.
Mass-market condos, those Outside Central Region (OCR), have seen prices go up 16.3 per cent between Q4 2010 and Q1 2013, compared with just 3 per cent for EC units over the same period.
ECs were reintroduced in Q4 of 2010, and have been popular with homeseekers. Of the 10,201 units across 19 developments launched for sale since then, 94.4 per cent, or 9,629 units, have been snapped up as at the end of June, SLP's data shows.
Another unintended effect may come from the recent total debt servicing ratio (TDSR) framework put in place to encourage financial prudence.
SLP said it understands that a buyer who wishes to upgrade from his current Housing and Development Board (HDB) flat can get a larger housing loan for an EC, rather than a private property, as the HDB monthly mortgage payment will not be factored into calculations for the debt servicing ratio when banks assess the amount of loan it grants to an EC buyer.
"In addition, the EC is cheaper than private property," the report said.
There are supply pressures at play as well.
Five new EC projects are expected to launch in the second half of the year, SLP said. But after these, the next EC project is slated for sale only next August or September.
And with new EC developments after Jan 11 governed by a regulation introduced in the latest round of cooling measures - which dictate that developers can launch an EC project for sale only 15 months from the date that the land is awarded or after foundation works are completed - it leaves a gap where supply is tight.
"During this period, the pent-up demand for ECs is likely to grow and will increase the price power of the developers of the EC projects to be launched in 2014, thus driving up the prices of ECs."
Nicholas Mak, head of research and consultancy at SLP International, acknowledged that the various cooling measures that have been introduced in the past few years need to be given time to work their way through.
In the meantime, to avoid a potentially sticky situation for ECs, he suggested that the government consider removing the 15- month waiting period for EC launches and refrain from increasing the income ceiling for public housing further.
Published July 26, 2013
Why ECs could see surge in demand soon: SLP
'Unintended effects' from 3 main areas could ignite demand for that market
By ong chor hao
[SINGAPORE] A cocktail of runaway private property prices, a new government policy and supply issues could inadvertently lead to a heating up of the executive condominium (EC) market.
Property agency SLP International explored this scenario in a report sent to The Business Times.
The EC market faces such "unintended effects" from three main areas, it said.
First, more demand is being channelled towards ECs, as the growth in private condominium and apartment prices continue to outpace that of ECs.
Mass-market condos, those Outside Central Region (OCR), have seen prices go up 16.3 per cent between Q4 2010 and Q1 2013, compared with just 3 per cent for EC units over the same period.
ECs were reintroduced in Q4 of 2010, and have been popular with homeseekers. Of the 10,201 units across 19 developments launched for sale since then, 94.4 per cent, or 9,629 units, have been snapped up as at the end of June, SLP's data shows.
Another unintended effect may come from the recent total debt servicing ratio (TDSR) framework put in place to encourage financial prudence.
SLP said it understands that a buyer who wishes to upgrade from his current Housing and Development Board (HDB) flat can get a larger housing loan for an EC, rather than a private property, as the HDB monthly mortgage payment will not be factored into calculations for the debt servicing ratio when banks assess the amount of loan it grants to an EC buyer.
"In addition, the EC is cheaper than private property," the report said.
There are supply pressures at play as well.
Five new EC projects are expected to launch in the second half of the year, SLP said. But after these, the next EC project is slated for sale only next August or September.
And with new EC developments after Jan 11 governed by a regulation introduced in the latest round of cooling measures - which dictate that developers can launch an EC project for sale only 15 months from the date that the land is awarded or after foundation works are completed - it leaves a gap where supply is tight.
"During this period, the pent-up demand for ECs is likely to grow and will increase the price power of the developers of the EC projects to be launched in 2014, thus driving up the prices of ECs."
Nicholas Mak, head of research and consultancy at SLP International, acknowledged that the various cooling measures that have been introduced in the past few years need to be given time to work their way through.
In the meantime, to avoid a potentially sticky situation for ECs, he suggested that the government consider removing the 15- month waiting period for EC launches and refrain from increasing the income ceiling for public housing further.