Why does everyone assume you’re rich if you buy an EC? That doesn’t make sense. By the time you make the down payment and cover the instalments, the EC means you’re pretty much the opposite of rich. Here’s a run-down on the painful differences, when you choose an EC over a BTO flat:
Why Executive Condominiums (EC) are Different?
Executive Condominiums (ECs) are another class of “sandwich” flats, like maisonettes or DBSS flats. They cater to a sandwich class, slightly above middle income people: those who can afford better than public housing, but still can’t afford a private property.
Unlike BTO flats, ECs are built by private developers. They are built by the same companies that put up “real” condominiums, with vast expertise in architecture, lifestyle accommodation, and pretentious French words. And while ECs begin as subsidised housing, they all turn into private housing after 10 years.
This results in four main differences, compared to BTO flats:
- No HDB Concessionary Loan
- Resale Rules from the 11th Year Onward
- Fewer ECs are in Mature Estates
- Less Predictable Resale Value
1. No HDB concessionary loan
If you buy an EC, you need to use a bank loan. A private bank loan only covers 80% of the valuation. Of the remaining 20%, up to 15% can come from grants and your CPF. That means ECs have an absolute minimum of 5% down payment in cash.
For a BTO flat, you have the option of a HDB concessionary loan. That’s why buyers of a BTO flats don’t have to give down payments.
2. Resale Rules from the 11th year onward
This is where ECs differ the most value as compared to BTO flats.
From their sixth to 10th years, ECs are sold like regular resale flats; only Singaporeans and Permanent Residents (PRs) can buy them. But from the 11th year, ECs go “fully private”. They can then be sold to foreigners and companies. This is a big deal, because it opens up the range of prospective buyers.
The downside is that, when buying resale ECs after the 11th year, buyers can no longer get housing grants for them. They are well and truly private property by then. (this can make a big difference in resale value)
PRs have to wait three years before they can buy a resale flat”, but after 11 years, your EC is private property, so PRs can buy without waiting.” And the eligibility of foreign buyers also helps:
“In general, a bigger pool of prospective buyers bodes well for capital gains. If you are selling a resale flat, you have no chance of tapping into foreign demand for local properties.”
3. Fewer ECs are in mature estates
Maybe the builders assumed that, if you can afford an Executive Condo, you can afford a car. Whatever the reason, many Executive Condos are located in places where you’d expect to see pack mules or a passing jungle expedition.
Most Executive Condos are not in mature estates. They tend to be in places like Punggol or Woodlands. In 11 years, maybe those places will be more developed. But for now, you should consider the convenience issues of staying there.
4. Less predictable resale value
This is where the debate starts. Executive Condo are new as a property type, so there’s a lot of argument about their resale value. The main question is this one:
Will executive condos sell for the same value as private condos?
There are two opposing camps on this. There is no reason why they will not… Executive Condos are built by private developers; they have the same amenities and same quality of finishing. That they are subsidized at the start is completely irrelevant. Why will this matter to future buyers?
First mindset of the market, I don’t think it will be easy to sell an Executive Condo as if it were a real condo. The fact is, the thinking of most Singaporeans is that Executive Condos are one level ‘below’ condos.
Second mindset is that regardless, both investors agreed that the market is too new; we’ll have to wait for a few years, and see what happens when all the more Executive Condos start hitting the open market. Chances are, most Executive Condo will appreciate better than their BTO counterparts.
An Executive condo is bought at a subsidized price, but sold like a private condo and they can be sold on the open market, where PRs don’t have to wait and foreigners are eligible to buy. How not to win in capital gains?