Singapore ECs continue to be a winner for buyers
EC Price Growth Lags Other Segments
ECs sell at lower prices than private condos despite having been built by private developers. Grants similar to those provided for public housing are used by the government to heavily subsidise new ECs. Ten years after the completion of an EC, units can be sold by foreigners.
ECs however are subject to more restrictive purchasing conditions, eligibility requirements (MOP), specific resale criterion, and are built-to-order public housing flats. Singaporeans and Singapore citizens married to permanent residents are eligible to purchase a new EC. Additionally, buyers cannot hold any other property during the MOP. They must also adhere to the mortgage servicing ratio in addition to total debt service ratio.
Possible reasons for the EC price growth lagging other segments include the rules imposed on borrowing limits and income thresholds. They’re in place to keep the properties affordable for more people and to prevent them from overstretching themselves.
In addition to existing TDSR, eligible EC purchasers are subject to a MSR of 30%. This means borrowers may only use 30% of their gross income per month to pay off their mortgage on a new EC. Moreover, new ECs buyers are subject to a ceiling on household income.
If EC price increases too rapidly, buyers may face high cash outlay which could cost them out.
Consider a pair with a combined annual income of S$16,000 who are buying a brand new EC. They can only borrow 75 per cent of property value, which comes to about S$1 million when you take into account the MSR ceiling and the income limit.
If the buyers choose to purchase a 1,400 sq ft three-bedroom EC at S$1,400 psf for S$1.4million, S$400,000 must be paid either in CPF or cash (where 5 percent of the selling price has to be paid as cash), along with stamp duties and lawyer’s fees.
Although the prices for new executive condo launches have risen due to strong demand, the short supply of units will continue to keep market conditions stable.
The prices of new executive condominiums, a popular hybrid segment combining condo facilities and criteria for public housing, have risen to record levels.
New launch prices increased in parallel with increasing demand, a shortage of land and an increase in the price of land for EC.
Using data from URA, the median cost of new ECs is expected to reach a high of S$1,417 (psf), in 2023.
Prices for ECs, however, have risen more slowly over the past 5 years compared with other private properties. ECs still look comparatively cheap compared to the other new homes available on the market.
The median new EC price rose from S$1,101 psf per unit in 2019 to S$1,417 psf per unit in 2023, a 28.9 % increase.
As a result, new landed properties saw a significant increase in price, jumping from S$1,053 to S$2,242 while new non-landed houses saw a 49.4% jump from S$1,664psf up to S$2,486psf.
Pricing for extra space that is affordable
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In the private residential sector, homebuyers who are looking for condos of at minimum 1,000 sq ft size and less than S$2,000,000 have few options. It will be harder for those on the market to find a 1,000 sq ft unit at a price below S$1.5million by 2023.
In 2013, such units accounted 32.4 percent (122) of new EC transactions (376)
Further, 44.9% (165) of new ECs are sold for less than S$2 Million but at least S$1.5M. In 2023, only 1.7% or 33 units of new private condominium units with at least 1,000 sq. ft. were sold at that price. 88% of new condos or 1,716 apartments were sold between S$2 million and S$5million. Last year, the lowest priced unit for new landed homes cost at minimum S$3 million.
Profit potential
Our profit analysis shows a majority of ECs made money on resale. To calculate the gain or loss of individual ECs, we compared the URA Realis sales caveats for 2007-2023 with those of the resale. The calculation does exclude costs, such as legal and interest fees.
A database of 28,652 ECs was mined to find 6,341 matched caveats. Almost every sample EC – 99.95% (6,338 unit out of 6,341) – was profitable. Each unit had an average profit of S$360,000.
1 307 of the units had a gross income at least equal to half a million dollars each. Seven units even exceeded S$1million.
The biggest profit was made by a CityLife@Tampines unit, which was bought in 2013 at S$1.91 million, and resold to S$3.29 millions in 2021. That’s a record profit almost S$1.38million. The second highest gain came from a unit in Esparina Residences which was resold with a profit of approximately S$1.33million in 2023. The Tampines Trilliant EC resold at a profit of S$1.19m was the third highest sale.
The recent surge in ECs prices resulted to high profits for a low price compared with private condominiums. In addition, the CPF Housing Grant Scheme provides a housing subsidy for up to S$30,000.
While EC prices will continue to rise in price, resulting a smaller profit margin on resale we believe that long-term demand will be healthy due to limited supply and comparatively cheaper prices compared to other properties.
Price stability due to limited supply
ECs are currently in short supply. Over the past 10 year period, demand for ECs (19072 sold units) has exceeded the number (16893 launched units).
Only one EC launched in this year – the 512-unit Lumina Grand Bukit Batok Avenue 5 The EC unit supply this year is lower than the average of 1,689 EC vehicles launched each year between 2014-2023. In comparison, up to 4,936 units have been released in 2012.
Under the Confirmed Land Sales List for H1-2024, the only site in the near term for a 710-unit EC Project at Jalan Loyang Besar is to be made available for purchase. Two more ECs are listed on the Reserve List and will produce an estimated 855 total units. But these reserve sites are only put up for tender if a government-acceptable minimum price is offered.
The limited supply of ECs may cause prices and demand to remain stable this year.
