Though the property market in Singapore as a whole is still sluggish, there are pockets within it that are performing well, one of those being Executive Condos (EC’s). The government’s decision to widen the pool of perspective investors/buyers by raising the income ceiling of anyone interested in purchasing one from S$12,000 to S$14,000 has certainly helped demand, and their position, neatly situated in between traditional HDB properties and private condos does make them an attractive proposition for an increasing number of people, particularly those with one eye on an investment.
EC’s were introduced as far back as 1995 in an attempt to cater for the growing number of people – mainly young professionals, who could afford more than an HDB flat, but still weren’t able to stretch to a private property. They are built by private developers, and facility-wise are very similar (especially the newer ones) to private condominiums. There are restrictions however on who is able to buy an EC, and what they can do with it once they have purchased it. For instance they are only available to Singaporean’s and there is a minimum occupancy period (MOP) of 5 years before they are able to sell the property (to Singaporean’s and PR’s), and they do not become fully privatised – i.e. the owner can sell the unit without any restrictions, for 10 years.
Just how much of a good investment EC’s are, is open to debate. From 2014 to 2015 there was a 62% increase in the total number of EC units sold which when considering the state of the market in general is a remarkable figure. Those figures are skewed however by the difference in the number of units hitting the market in those years (3750 in 2015 compared to 2505 in 2014). Further analysis reveals that the take up rate actually slowed in 2015 compared with 2 years earlier.
The most important factor is that generally, an EC‘s original sales price is 20% lower than that of an equivalent private Singapore condominium. That gap reduces over time, until on average it is between 5% and 9% by the time it hits the open market. The increase in respective value is obviously a good thing, but only if they can compete head to head with private condos, in terms of build quality and facilities, something that they are increasingly able to do.
The amount coming on stream through 2016 and 2017 has reduced, while the designs and features has continued to improve, so the future does remain good for those wishing to go down the EC route. The stabilisation of the HDB resale market is also promising, as it gives existing HDB householders more confidence in the market, meaning they are more likely to upgrade.
Like all investments, there are two overriding factors that need to be considered. The initial purchase price is the most important, as if this is too high, relative to other properties, you are always going to struggle to make a return. The other is the length of time within which you need your investment to start working for you. Due to the nature of the restrictions, if you are looking for a quick return (within 5 to 10 years) then maybe an EC is not the property for you. Those happy to wait for the 10 year time limit to elapse however, should – if they bought wisely – be able to reap the rewards of these unique properties.
You might want to find out more about the recent news on Collective Sales of HUDC developments (predecessor of ECs) from the links below,
- Green light to Shunfu Ville by the Court of Appeal
- The Big Picture with Sales Deals involving Rio Casa, Goh & Goh Building
- Successive Collective Sales of Raintree Gardens
Upcoming New Launch Condos in Singapore
Developments that will obtained TOP in 2018