The move by the government to ease property cooling measures through adjusting downwards the rates for seller’s stamp duty and the holding period came as a surprise to many. Although the change doesn’t affect Executive Condo Market directly, there should be positive effects due to improvement in the sentiment in the private residential market.
However, the demand for EC was already up before the government made the announcement. In 2016, the ECs rose which saw buyers purchasing close to 3,999 units. This indicates a 56.8% increase as compared to the 2,550 units sales in 2015. The rise in sales can be partially linked to improving market sentiments in the private housing market. This is because buyers came back to the market convinced that private home prices are becoming stable.
Considering that those EC prices have not declined much after the jump in EC volumes due to improving sentiments you might be wondering whether ECs are still a value buy to buyers. Let’s look at some of the reasons why ECs still present a value buy:
Executive Condos which are ideally a hybrid between private and public housing were trendy among purchasers from 2012 to 2013. Just like private condos, ECs are designed and built by private developers, and they offer facilities such as BBQ pits and swimming pools. The government also provides a maximum grant of S$30,000 to first time EC buyers.
Nevertheless, purchasing a new condo doesn’t come without restrictions. Buyers of new Executive Condos are required to form a family nucleus comprising of a Singapore citizen or two Singapore Citizens and a permanent resident plus a prescribed monthly household maximum income of S$14,000. There is also a new MOP Minimum occupation period of five years that new buyers must adhere to in order to sell their property in the market to permanent residents or Singapore citizens only. The EC can only be considered as wholly privatized and allowed for sale to foreigners after 10 years.
Unlike new private condos, new executive condo units are also sold at a discount. Presently, the discount lies between 20% and 25%. But, once the restrictions on the executive condos are lifted after the 5-year MOP and during privatization, the price gap of resale condos reduce to about 5% and 9% respectively.
How Fast Were Executive Condos Sold In The Past?
Executive condos have enjoyed huge success since the launch of the EC scheme in 1996. In the past, records show that most ECs get sold out within 2 years of launch. The key driver of the demand for ECs is the price difference between suburban private condos and executive condos. ECs also enjoy lower buying price, bigger potential for capital appreciation and higher margins of safety.
In short, ECs still offer a suitable value proposition for potential buyers with their remarkable price gap alongside availability of government grants.