Property 2011 | |||||||||
Published September 15, 2011  | |||||||||
| ECs in the spotlight GERALD LIM and HAN HUAN MEI assess the impact of recent policy changes on the executive condominium market IN the 10 months since executive condominiums (ECs) re-emerged in the market, several EC projects have been launched, supplying 3,620 units. These include Esparina Residences (Sengkang), The Canopy (Yishun), Prive (Punggol), Austville Residences (Sengkang), Belysa (Pasir Ris), Blossom Residences (Bukit Panjang) and RiverParc Residences (Punggol). By July, some 2,800 units (77 per cent) had been sold.
Does the strong take-up merely reflect Singaporeans' insatiably strong appetite for affordable condominium housing? What are the intrinsic qualities of ECs that attract buyers? What are those that turn buyers away? As recent policy changes will affect future EC projects, it is apt to do a reality check on this hybrid segment of the housing market. In August 2011, the Government announced the raising of the income ceiling for Build-to-Order flats (BTO) from $8,000 to $10,000, while that for ECs was raised from $10,000 to $12,000. At the same time, the CPF housing grant eligible for first-time EC buyers will be disbursed according to a tiered system based on household income (see Table). The new changes are widely welcomed by higher-income earners, specifically those within the $10,000 to $12,000 monthly income bracket who are on the verge of being priced out of condominium living as private suburban condominium prices kept moving upwards. Previously, they would have to buy private property, but with these changes, they can enter the EC market and enjoy a grant between $10,000 and $20,000. In examining the impact of the raised income ceiling on the EC market, CBRE Research analysed the income profile of current EC buyers. Ballpark figures provided by developers show that a high proportion of EC buyers, around 55-70 per cent, have an income range of up to $8,000 a month. A lower proportion, about 30-45 per cent, are in the $8,000-10,000 income group. This is surprising as one would expect that first-timer buyers who earn less than $8,000 a month would opt for BTO flats direct from HDB. Instead, a significant number of them actually opt for ECs. Very likely, the $30,000 grant and some funding from family members enabled them to buy ECs. By way of comparison, a new five-room HDB flat costs $290,000-350,000 while a new EC costs almost double at $700,000-750,000, in the period Q4 2010 to Q2 2011. Raising the income ceiling might see an increase in the proportion of buyers on the higher scale of the income range. That said, those earning $10,000-12,000 should note that every additional $1,000 income earned by the household translates to $10,000 less in the housing grant. This does not necessarily make it easier for them to buy an EC. The housing grant makes up part of the mandatory 20 per cent down payment upon the exercise of the option to purchase. For those who enjoy the full $30,000 grant, it lowers the cash requirement considerably. New ECs are also open to HDB upgraders who are no longer subjected to a resale levy on their HDB flats. In an EC launch, 95 per cent of the units are reserved for first-time flat buyers during the first month, and thereafter, unsold units are fully opened up to all eligible buyers including HDB upgraders. Before 2010, anecdotal evidence showed that about 10-15 per cent of EC buyers were those upgrading from an HDB flat. Recent EC sales have shown a changing trend, in that 30-35 per cent of the buyers were HDB upgraders. On the other hand, the decline in the share of first-time flat buyers could mean that fewer can afford the new ECs, where prices have risen by 22.5 per cent to $685 per square foot (psf) since Q2 2008. Strict eligibility and ownership conditions The eligibility conditions for ECs can be rather restrictive. Buyers of new ECs must be a family nucleus, of which the main applicant must be a Singapore citizen and one other member of the family must be a citizen or at least, a permanent resident. A couple who booked an EC under the fiance/fiancee scheme must produce a marriage certificate by the date of keys collection, which happens around three years later when the project is completed. EC buyers are subject to a time-bar. Before they can sell their homes, EC owners must physically occupy the unit for a minimum five years from the date of the Temporary Occupation Permit. After the fifth year, they can sell their units, but only to Singaporeans and Singapore Permanent Residents. After the 10th year, the units can be sold to anyone, including foreigners. This means that EC buyers have to wait, on average, at least eight years from the time of purchase (three-year construction period plus five-year Minimum Occupation Period) before they can sell them to a selected group of people. In contrast, those who bought condos in the private market need to wait only four years if they wish to sell them without paying a sellers' stamp duty. In a situation where prices escalate rapidly, that is, 15-20 per cent price growth in a year, private condo home buyers are able to sell their properties within two to three years from the date of purchase with some capital gains. The same cannot be said about ECs. The recourse for EC buyers is that they can still enjoy deferred payment, that is, no payment is required until the project is completed. Like HDB flats, ECs are meant for owner-occupation, hence the eligibility criteria and ownership conditions. In addition, the subsale of booked ECs is not allowed. Therefore, a household earning over $10,000 to $12,000 aspiring to a condominium must determine whether the grant of $10,000-20,000 is worth the eight-year holding period. In a swiftly rising market, there is clearly an opportunity cost for holding it over such a long period. Supply of ECs and prices Looking ahead, the public can expect to see another 3,560 EC units coming on-stream in the next two to 12 months, from four EC sites that were sold to developers and two more EC sites that were recently put up for tender. There are two more reserve EC sites on the Government Land Sales programme which could add a further 1,200 units if these sites are triggered and eventually awarded. Despite the increased EC supply, there are some concerns that developers could price them higher beyond the current $700-750 psf range. One reason is that land costs have risen somewhat since the earlier EC sites were awarded. Secondly, the current shortage in housing units and the increase in income ceiling could lead to more willing buyers waiting in the wings. Unlike BTO flats where prices are set by the Government, EC prices are determined by market mechanisms and developers. The threat of a double dip recession and worsening global economic conditions could of course provide a check on runaway property prices, including for ECs. And if the worst does happen, and the adverse situation becomes prolonged and entrenched, then an eight-year holding period for an EC may not seem too bad after all. The writers are associate directors at CBRE Research 沉寂五年多之后 EC再发力成新宠文/林金民 译/李敏雯 (2011-09-17)
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ECs in the spotlight
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