According to a poll conducted by PropNex, buyers are concerned about the rising prices of newly constructed executive condominiums

Boosting the monthly household income ceiling, revising the mortgage payment ratio upwards, and boosting the supply of EC land under the GLS Confirmed List are some of the suggestions that have been made to increase affordability within the housing market.

Aug 5, 2024

In a poll conducted by the real estate consultancy PropNex, fifty-five percent of HDB flat owners who participated in the survey stated that the prices of new executive condominiums (ECs) were either unaffordable or highly impossible to afford.

Nearly 1,250 people were polled by PropNex between March and April 2024 about the significance of ECs in achieving the housing goals of middle- and upper-middle-income families in Singapore who want to own a private home. The homeowners were among those who participated in the survey.

The cautionary data provided by URA Realis revealed that the median transacted unit price of new EC units has experienced a significant increase over the past few years, going from S$798 per square foot (psf) in 2017 to S$1,417 psf in 2023. The median unit price of new ECs was higher than the threshold of S$1,500 per square foot during the first half of the year 2024.

In light of this, Ismail Gafoor, chief executive officer of PropNex Realty, stated that "to this end, perhaps the government can consider tweaking some policies that could help to improve the affordability of new ECs." They could include increasing the monthly household income ceiling for couples or families to a level that is higher than the current S$16,000, or modifying the mortgage servicing ratio (MSR) upwards from the current 30 percent, taking into consideration the fact that the prices of new apartment complexes have increased over the past few years.

According to Gafoor, another idea that received support from a significant number of respondents was the increase in the supply of EC land that was included on the Confirmed List of the government land sales (GLS) program.

Despite the fact that there are worries over affordability, forty-four percent of the people who participated in the study conducted by PropNex are either in agreement or strongly in agreement that ECs are still significant in terms of responding to the private housing ideals of households.

According to Gafoor, "ECs continue to be popular with homebuyers in Singapore, and new EC projects generally tend to see stronger sales at launch compared with other private condo launches due to their more affordable pricing." This is because ECs are more affordable than other private condo launches.

The respondents reported that twenty-eight percent of them had a monthly household income that is less than five thousand Singapore dollars, while thirty-eight percent of them earn between five thousand and ten thousand Singapore dollars per month. A further 22 percent of the respondents have a monthly household income that falls between S$10,001 and S$16,000, while 12 percent of the respondents have a household income that is greater than S$16,000 per month.

Fifty-five percent of those who participated in the survey expressed their opinion that the monthly household income ceiling of sixteen thousand Singapore dollars for new ECs had to be amended. On the other hand, the remaining respondents were of the opinion that the current income ceiling is suitable.

At the current household income ceiling of S$16,000 per month, potential buyers of EC would be able to secure bank financing of approximately S$909,000. This transaction would be based on a mortgage-to-sale ratio (MSR) of thirty percent, an interest rate of four percent per year, and a loan tenure of twenty-five years. However, even after taking into account the amount of the bank loan, there would still be a deficiency of approximately S$295,000 that has to be paid. This is based on the median price of ECs from January to May 2024, which was approximately S$1.5 million.

Nearly S$600,000 would be the total amount of the down payment and the deficit, which the EC buyers are required to pay in a combination of cash and money from their Central Provident Fund (CPF) accounts.

According to PropNex, "This is a substantial sum for many couples, and it may put new EC units out of their reach if they do not have sufficient savings or access to financial assistance from family members."

The results of the survey indicated that fifty-two percent of those who participated in the survey believed that the MSR need to be revised for EC purchases, whereas forty-eight percent of those who were surveyed believed that it ought to remain at thirty percent.

According to Wong Siew Ying, who is the head of research and content for PropNex, "It is only natural that there will be concerns regarding the potential implications of such policy developments." For instance, the modification to the monthly household income ceiling can result in an increase in the number of purchasers with higher incomes entering the market, which might accidentally result in households with lower incomes being pushed out of the market. The possibility that some developers would try to take advantage of the higher income ceiling and higher MSR by increasing the selling price of ECs is another factor that may cause buyers to feel uneasy.

According to Wong, one other method for enhancing the affordability of EC is to increase the supply of such homes in order to meet the healthy demand. This can be accomplished by releasing additional EC sites on the Confirmed List within the GLS program.

According to PropNex, during the past few years, the government has released approximately two Confirmed List EC sites for tender each year. This has resulted in increased rivalry among developers for such sites, which has contributed to higher land bids.

"By increasing the supply of EC sites – possibly to four Confirmed List plots per year – it could potentially help to rein in land bid prices by developers," the agency stated. "This could be a significant step towards achieving this goal."

A land price of S$557 million, which is equivalent to S$729 per square foot per plot ratio (psf ppr), was achieved by an EC site in Pasir Ris at the conclusion of a tender conducted the previous week. This land price is a record high for ECs. It originated from China Communications Construction firm, ZACD, and CNQC International, which is the parent firm of Qingjian Realty.

At the same time, a joint venture between Kheng Leong, the private real estate arm of the Wee Cho Yaw family, and builder Low Keng Huat put the highest bid of S$279 million, which is equivalent to S$793 per square foot each year, for a land piece at Canberra Crescent that is intended to be developed into a condominium.

Comparatively, this was only approximately ten percent greater than the most recent EC that had been sold before to that day. At a price of S$543.3 million, or S$721 per square foot per year, a Tampines EC property was sold to the Sim Lian Group in October of 2023.