New Reporter
26-02-24, 09:18
ECs still a winning proposition for buyers
New executive condo launch prices have risen, but strong demand and short supply will keep the market firm
Christine Sun and Timothy Eng
Feb 23, 2024
PRICES of new executive condominiums (ECs), a popular hybrid segment combining private condo facilities with public housing eligibility criteria, reached record levels in recent years.
New launch prices rose in tandem with growing demand, short supply and increases in prices of land for EC development.
Based on data from the Urban Redevelopment Authority (URA), the median price of new ECs hit a new high of S$1,417 per square foot (psf) in 2023.
However, prices have risen at a much slower pace compared to other private properties over the past five years, and ECs continue to look comparatively reasonable relative to other new private homes in the market.
The median price of new ECs rose by 28.9 per cent from S$1,101 psf in 2019 to S$1,417 psf in 2023.
https://i.imgur.com/MHuUC60.jpeg
In contrast, the median price of new landed properties jumped significantly by 112.9 per cent from S$1,053 psf to S$2,242 psf, while prices of new non-landed properties surged by 49.4 per cent from S$1,664 psf to S$2,486 psf over the same period.
EC price growth lags other segments
ECs are sold at lower prices than private condominiums despite being built by private developers. The government greatly subsidises new ECs with grants that are comparable to those given out for public housing flats. An EC project is privatised 10 years after its completion; thereafter units in the development can be sold to foreigners.
However, ECs are subjected to more restrictive buying conditions, eligibility requirements, minimum occupancy periods (MOP), and specific resale criteria which are similar to Build-To-Order (BTO) public housing flats. To be eligible to buy a new EC, buyers must be Singapore citizens or a citizen married to a permanent resident. In addition, buyers are not allowed to hold other properties during the MOP and must adhere to a mortgage servicing ratio (MSR) in addition to the total debt serving ratio (TDSR).
One possible reason why EC price growth lags other segments could be the borrowing limits and income ceiling rules imposed. They are put in place to ensure that the properties stay accessible to more people who do not end up overstretching their budgets.
Eligible EC buyers are required to comply with a 30 per cent MSR on top of the existing TDSR rules, meaning borrowers can use only 30 per cent of their gross monthly income to repay their mortgage for a new EC. Moreover, buyers of new ECs are subjected to a household income ceiling.
If EC prices rise too steeply, buyers face high cash outlay, which may price out many.
Consider a couple with a combined income of S$16,000 buying a new EC. They can borrow only up to 75 per cent of the property price, which works out to around S$1 million based on the MSR and income ceiling.
If the buyers opt to purchase a 1,000 sq ft thee-bedroom new EC for S$1.4 million at S$1,400 psf, S$400,000 of the property price must be paid in cash or CPF (of which 5 per cent of the selling price must be paid in cash), in addition to stamp duties, lawyer’s fees and other miscellaneous costs.
Accessible pricing for more space
Homebuyers after a condo of at least 1,000 sq ft in size and under S$2 million have very few options in the private residential market. Those in the market would be even more hard-pressed to find a new unit of at least 1,000 sq ft at below S$1.5 million in 2023.
Such units made up 32.4 per cent (122 units) of all new EC transactions (376 units) last year.
https://i.imgur.com/rCTuRIo.png
Furthermore, 43.9 per cent (165 units) of new ECs were sold for at least S$1.5 million but less than S$2 million. In comparison, only 1.7 per cent of new private condo units of at least 1,000 sq ft – or 33 units – were sold at this price range in 2023. The majority of new condos (88 per cent or 1,716 units) were sold for at least S$2 million but less than S$5 million. For new landed properties, the lowest-priced units cost at least S$3 million last year.
Profit potential
Our profit analysis shows the majority of ECs were profitable on resale. Gains and losses of individual EC units were calculated by matching URA Realis new sale caveats between 2007 and 2023 to the resale caveat of the same unit over the same time frame. The calculation does not consider costs such as legal fees and interest.
There were 6,341 matched caveats mined from a database of 28,652 new EC transactions. Almost all – 99.95 per cent (6,338 units out of 6,341) – of the sample ECs were profitable, yielding an average gross profit of over S$360,000 each.
Of this number, 1,307 units generated a gross profit of at least half a million each, with seven units exceeding S$1 million.
https://i.imgur.com/EJeGAFO.png
The highest profit recorded was for a unit at CityLife@Tampines, bought in 2013 for S$1.91 million and resold for S$3.29 million in 2021, yielding a record profit of almost S$1.38 million. The next highest gain was from a unit at Esparina Residences, which was resold for a profit of about S$1.33 million in 2023. The third most profitable sale was of an EC at The Tampines Trilliant resold in 2023 for a gross profit of just over S$1.19 million.
The large gains came out of the recent run-up in EC prices, yielding high profits over a low cost price compared to private condos. Moreover, eligible buyers receive a housing subsidy of up to S$30,000 under the CPF Housing Grant Scheme.
While the launch prices of EC prices may continue to rise, resulting in smaller profit margins on resale, we anticipate that demand will remain healthy in the long run due to their limited supply and comparatively lower price points compared to other private properties.
Limited supply sustains EC prices
The market for ECs is currently undersupplied. Demand for new ECs (19,072 units sold) has been outpacing the number of units launched (16,893 units) over the past 10 years since 2014.
Only one EC has been launched so far this year: the 512-unit Lumina Grand at Bukit Batok Avenue 5. This year’s EC supply will be lower than the average 1,689 EC units launched per year between 2014 and 2023. In comparison, as many as 4,936 units were released in 2012 and 3,750 units in 2015.
In the near future, only one site for a 710-unit EC project at Jalan Loyang Besar will be released for sale, under the Confirmed List of the H1 2024 Government Land Sales programme. Two other EC sites are on the Reserve List, and they yield an estimated 855 units in total. However, these reserve sites will only be launched for tender if they receive an offer of a minimum price that is deemed acceptable by the government.
Given the limited supply of ECs, prices and demand may likely be sustained this year.
Christine Sun is chief researcher and strategist at OrangeTee Group, and Timothy Eng is assistant manager at OrangeTee & Tie Research & Analytics
https://www.businesstimes.com.sg/property/bt-property-week-2024/ecs-still-winning-proposition-buyers
New executive condo launch prices have risen, but strong demand and short supply will keep the market firm
Christine Sun and Timothy Eng
Feb 23, 2024
PRICES of new executive condominiums (ECs), a popular hybrid segment combining private condo facilities with public housing eligibility criteria, reached record levels in recent years.
New launch prices rose in tandem with growing demand, short supply and increases in prices of land for EC development.
Based on data from the Urban Redevelopment Authority (URA), the median price of new ECs hit a new high of S$1,417 per square foot (psf) in 2023.
However, prices have risen at a much slower pace compared to other private properties over the past five years, and ECs continue to look comparatively reasonable relative to other new private homes in the market.
The median price of new ECs rose by 28.9 per cent from S$1,101 psf in 2019 to S$1,417 psf in 2023.
https://i.imgur.com/MHuUC60.jpeg
In contrast, the median price of new landed properties jumped significantly by 112.9 per cent from S$1,053 psf to S$2,242 psf, while prices of new non-landed properties surged by 49.4 per cent from S$1,664 psf to S$2,486 psf over the same period.
EC price growth lags other segments
ECs are sold at lower prices than private condominiums despite being built by private developers. The government greatly subsidises new ECs with grants that are comparable to those given out for public housing flats. An EC project is privatised 10 years after its completion; thereafter units in the development can be sold to foreigners.
However, ECs are subjected to more restrictive buying conditions, eligibility requirements, minimum occupancy periods (MOP), and specific resale criteria which are similar to Build-To-Order (BTO) public housing flats. To be eligible to buy a new EC, buyers must be Singapore citizens or a citizen married to a permanent resident. In addition, buyers are not allowed to hold other properties during the MOP and must adhere to a mortgage servicing ratio (MSR) in addition to the total debt serving ratio (TDSR).
One possible reason why EC price growth lags other segments could be the borrowing limits and income ceiling rules imposed. They are put in place to ensure that the properties stay accessible to more people who do not end up overstretching their budgets.
Eligible EC buyers are required to comply with a 30 per cent MSR on top of the existing TDSR rules, meaning borrowers can use only 30 per cent of their gross monthly income to repay their mortgage for a new EC. Moreover, buyers of new ECs are subjected to a household income ceiling.
If EC prices rise too steeply, buyers face high cash outlay, which may price out many.
Consider a couple with a combined income of S$16,000 buying a new EC. They can borrow only up to 75 per cent of the property price, which works out to around S$1 million based on the MSR and income ceiling.
If the buyers opt to purchase a 1,000 sq ft thee-bedroom new EC for S$1.4 million at S$1,400 psf, S$400,000 of the property price must be paid in cash or CPF (of which 5 per cent of the selling price must be paid in cash), in addition to stamp duties, lawyer’s fees and other miscellaneous costs.
Accessible pricing for more space
Homebuyers after a condo of at least 1,000 sq ft in size and under S$2 million have very few options in the private residential market. Those in the market would be even more hard-pressed to find a new unit of at least 1,000 sq ft at below S$1.5 million in 2023.
Such units made up 32.4 per cent (122 units) of all new EC transactions (376 units) last year.
https://i.imgur.com/rCTuRIo.png
Furthermore, 43.9 per cent (165 units) of new ECs were sold for at least S$1.5 million but less than S$2 million. In comparison, only 1.7 per cent of new private condo units of at least 1,000 sq ft – or 33 units – were sold at this price range in 2023. The majority of new condos (88 per cent or 1,716 units) were sold for at least S$2 million but less than S$5 million. For new landed properties, the lowest-priced units cost at least S$3 million last year.
Profit potential
Our profit analysis shows the majority of ECs were profitable on resale. Gains and losses of individual EC units were calculated by matching URA Realis new sale caveats between 2007 and 2023 to the resale caveat of the same unit over the same time frame. The calculation does not consider costs such as legal fees and interest.
There were 6,341 matched caveats mined from a database of 28,652 new EC transactions. Almost all – 99.95 per cent (6,338 units out of 6,341) – of the sample ECs were profitable, yielding an average gross profit of over S$360,000 each.
Of this number, 1,307 units generated a gross profit of at least half a million each, with seven units exceeding S$1 million.
https://i.imgur.com/EJeGAFO.png
The highest profit recorded was for a unit at CityLife@Tampines, bought in 2013 for S$1.91 million and resold for S$3.29 million in 2021, yielding a record profit of almost S$1.38 million. The next highest gain was from a unit at Esparina Residences, which was resold for a profit of about S$1.33 million in 2023. The third most profitable sale was of an EC at The Tampines Trilliant resold in 2023 for a gross profit of just over S$1.19 million.
The large gains came out of the recent run-up in EC prices, yielding high profits over a low cost price compared to private condos. Moreover, eligible buyers receive a housing subsidy of up to S$30,000 under the CPF Housing Grant Scheme.
While the launch prices of EC prices may continue to rise, resulting in smaller profit margins on resale, we anticipate that demand will remain healthy in the long run due to their limited supply and comparatively lower price points compared to other private properties.
Limited supply sustains EC prices
The market for ECs is currently undersupplied. Demand for new ECs (19,072 units sold) has been outpacing the number of units launched (16,893 units) over the past 10 years since 2014.
Only one EC has been launched so far this year: the 512-unit Lumina Grand at Bukit Batok Avenue 5. This year’s EC supply will be lower than the average 1,689 EC units launched per year between 2014 and 2023. In comparison, as many as 4,936 units were released in 2012 and 3,750 units in 2015.
In the near future, only one site for a 710-unit EC project at Jalan Loyang Besar will be released for sale, under the Confirmed List of the H1 2024 Government Land Sales programme. Two other EC sites are on the Reserve List, and they yield an estimated 855 units in total. However, these reserve sites will only be launched for tender if they receive an offer of a minimum price that is deemed acceptable by the government.
Given the limited supply of ECs, prices and demand may likely be sustained this year.
Christine Sun is chief researcher and strategist at OrangeTee Group, and Timothy Eng is assistant manager at OrangeTee & Tie Research & Analytics
https://www.businesstimes.com.sg/property/bt-property-week-2024/ecs-still-winning-proposition-buyers