Buzz on EC income cap draws buyers

http://www.straitstimes.com/business...p-draws-buyers

Buzz on EC income cap draws buyers

Aug 22, 2015

Rennie Whang


Some buyers of executive condominiums (ECs) have placed applications with developers in anticipation that the income ceiling may be raised soon.

This is the case at the 14 or so EC projects on the market. They include The Brownstone and The Vales.

The limit is currently $12,000 for ECs and $10,000 for new HDB flats.

Some buyers who are above the eligibility income ceiling for ECs are understood to have reserved units after National Development Minister Khaw Boon Wan said in March he was considering raising the level.

Property circles have been abuzz that an announcement could come as soon as tomorrow when Prime Minister Lee Hsien Loong delivers his National Day Rally speech, an occasion in which headline announcements of this sort are often made.

Experts expect an increase of about $2,000 to the ceiling for both housing segments.

In the past, an EC applicant just several hundred dollars above the income limit could appeal to HDB but those with household incomes of $13,000 or $14,000 would likely be rejected. A Housing Board spokesman said cases it has generally considered "involve applicants whose income exceeds the ceiling only marginally, or who have extenuating circumstances like having to support aged parents or siblings with special medical conditions".

In the months since Mr Khaw's remarks, more applicants in the $13,000 to $14,000 income bracket have been visiting EC showflats, The Straits Times understands.

Many of their applications are parked with developers or agents, who are waiting for a rule change before submitting their forms to HDB.

The moves come amid a soft market with about 2,232 launched and unsold ECs and another 3,007 units not launched as at end June. This means there is little opportunity cost for developers to reserve a unit.

Some of these wealthier buyers are expected to show up at today's launch of Sol Acres EC in Choa Chu Kang. The project by MCL Land has received about 800 e-applications.

MCL Land chief executive Koh Teck Chuan said any rise in the income ceiling would be positive for ECs, but whether this would spill over to the private market is yet to be seen. "Private market buyers are still constrained by the Total Debt Servicing Ratio," he noted.

As more people can choose to buy an EC, private home sales may be affected, said Mr Elson Poo, general manager of marketing and sales at Frasers Centrepoint Homes. "But buyers in such a high-income bracket - $12,000 to $14,000 with the potential to earn more - can usually afford a private home and may not like the location of an EC, even if they are eligible to buy one."

Mr Li Jun, general manager of Qingjian Realty (South Pacific) Group, was less sanguine. "Assuming the increase in income ceiling for both HDB flats and ECs is similar, EC developers might face a situation where the number of potential buyers is fewer... For example, the number of households with income between $10,000 and $12,000 is 50,000. Whereas, after the income ceiling is increased, the number of households with income between $12,000 and $14,000 is reduced to only 40,000."

But a rise in the income ceiling for both segments "would be relevant to stay in tandem with the rising salary and income of Singaporeans", he added.

PropNex Realty key executive officer Lim Yong Hock said EC prices could increase and a recent uptick in sales - from 110 in June to 495 last month - is partly a result of buyers worried that this, in fact, will occur.

It is also possible that the raising of the income ceiling for new HDB flat purchases may have the opposite effect of driving demand to public housing, particularly, for buyers who are looking at no-frills housing.

Market watchers say these are typically couples with a combined monthly income higher than $10,000, who do not want to commit too much financial resources to housing. They would rather buy an HDB flat than a condo or EC unit.

http://www.theedgeproperty.com/sg/co...income-ceiling

ECs set to ride rise in income ceiling?

By Lin Zhiqin & Esther Hoon / The Edge Property | August 29, 2015 12:00 PM MYT
Prime Minister Lee Hsien Loong announced in his National Day Rally speech on Sunday that the income ceiling to buy new HDB Build-to-Order flats will be raised from $10,000 to $12,000 and the income ceiling for new executive condominiums (ECs) will be raised from $12,000 to $14,000. Under the new policy that came into effect on Aug 24, another 86,000 Singaporean households will become eligible to buy BTO flats and another 65,000 households will be able to buy new ECs (see table).



http://d22xfs0uvgnjtu.cloudfront.net...8/31/EC_T1.JPG

Source: Singstat, The Edge Property



If the new BTO-eligible households show a strong preference for new flats instead of resale units, the sluggish HDB resale market could slump even further. However, the actual impact will likely be muted as Singaporeans who have bought two BTO flats or utilised CPF grants for two resale flats, or a combination of the two, will no longer be eligible for further BTO applications. The further tapering of BTO supply from around 22,500 units last year to 15,000 this year, and a probable continued reduction in supply next year will drive demand for resale flats.

With more households becoming eligible, applicants’ chances of securing a BTO flat will likely be lowered owing to heightened competition from the expanded pool of buyers. While the more affluent can afford to miss the opportunity, the lower-income applicants with fewer housing options could be disadvantaged.

The number of households eligible to buy new ECs will increase by about 65,000, but ECs could also potentially lose 86,000 households to the BTO market. The target market for ECs could therefore shrink by about 24%, or 21,000 households. The actual impact will depend on how much buyer demand will shift from ECs to BTO flats and from condos to ECs. If the government reduces the supply of BTO flats, the exodus of buyers from the EC market to BTO flats would be limited.

Meanwhile, the price advantage of ECs could ease demand for private condos. EC prices have softened as seen in examples such as Sol Acres, which saw its first phase of 707 units launched at an average $780 psf, below analysts’ estimates of above $800 psf. There is still demand for ECs if buyers find a valid value proposition, as shown by the 247 units at Sol Acres and 185 units at The Brownstone sold over their respective launch weekends.

Average prices at recent EC launches such as Bellewaters, The Vales and The Brownstone have been 20% to 30% lower than the new condos nearby. Additionally, units at ECs tend to be bigger than condo units of the same approximate price. For instance, 1,300 sq ft units at The Brownstone in Sembawang and at Bellewaters and The Vales in Sengkang have been sold at about $1 million, but buyers at the surrounding new condos paid a similar amount for units of between 900 and 1,100 sq ft. New ECs are also trading at lower or similar prices compared with older resale condos in the vicinity.

The only drawback for ECs is their resale and leasing restrictions as well as the continued enforcement of the 30% Mortgage Servicing Ratio. For instance, a household with income of $14,000 can purchase a private home of up to $2.3 million, compared with an EC at only $1.17 million, assuming the borrower maximises the 60% Total Debt Servicing Ratio. ECs will likely appeal to more financially prudent buyers who prefer to keep their MSR low, or those who prefer to pay off their mortgage over a shorter number of years at a higher MSR.

With the launched but unsold EC inventory at 2,898 based on URA’s July developer sales data and an estimated 4,888 (excluding Sol Acres’ 707 units) unlaunched units in the pipeline, the higher income ceiling will likely prove to be a boon to EC developers only if they continue to offer good value to buyers. The rise in demand will probably not lead to higher prices for new ECs in the short term. In turn, developers of mass-market private residences will probably be pressured to offer more affordable prices to shore up demand in the face of stiff competition from the ECs.



This article appeared in The Edge Property Pullout of Issue 692 (August 31) of The Edge Singapore.

Increase in buyer or decrease in buyer, what do you think and why.

Good for Government or Bad, what do you think and why.

Quote:

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Originally Posted by Arcachon

Increase in buyer or decrease in buyer, what do you think and why.

Good for Government or Bad, what do you think and why.

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If you read the article, increase in BTO buyers and probably increase in EC buyers if prices are attractive.
Article didn't comment on Government. IMO it's good since it shows they are willing to review policies to give more citizens more options.