The prices of executive condos are beyond affordability. Is it the right time to refine this model?
In contrast, the developers determine the price for new EC housing. In addition, the prices of EC homes may be affected by land prices that developers are paying at tenders. The highest bid for a Tengah EC was S$701 psf/plot.
Singaporeans who have made good progress in their career can buy a brand new EC.
More EC sites in prime locations should be released. Totodate, raise the income threshold to expand the pool new EC homeowners. We should also cap the size of ECs to keep them affordable.
Can the EC be refined so that it better meets the needs young Singaporeans to purchase their own dream homes without the need for parental help?
Some of the new ECs that are available today are not affordable.
A 1,000-square-foot EC unit, roughly equivalent to a Housing and Development Board (4-room) flat, could cost S$1.46M, excluding the stamp duty and other legal fees. S$1.75m could be the price for a new 1,200sqft EC home, which is approximately the size of a HDB four-room apartment.
Local couples can be potential buyers for new EC homes. These couples may have monthly household incomes that are higher than the HDB Build To Order ceiling of S$14,000 but still meet the S$16,000 income ceiling. A couple whose monthly household income is above S$12,000 will not be eligible to receive the CPF Housing grant for an EC house.
The liquidity of new ECs may be boosted by parents funding their adult children’s home purchases.
Stretched affordability
While affordability for new ECs may be stretched, young couples with no parental help could find it difficult to afford. For a young couple with a monthly income that is just above the ceiling for EC homes, a S$1.46m unit would cost about 7.6 times this amount.
Couples who have CPF and cash savings could find it difficult to pay the equity portion of the EC purchase price if 75 percent is funded through debt and the rest by equity.
The couple may also violate the mortgage service rate (MSR), a ratio that is applied to purchasers of new EC properties. MSR refers the portion of a borrower’s gross monthly earnings that is used to repay all property loans including the loan applied for. The maximum amount is 30 per cent.
Singapore has many young people who struggle to realize their dreams of private housing. Purchasing an executive condo (EC) is a great way to achieve private homeownership. The new EC units can be as much as a third less expensive than comparable condo units
A healthy appetite exists for new ECs. City Developments Ltd, C09 +1.12% said that the developer had sold 269 units (53% of 512 homes) of the Lumina Grand EC Bukit batok following its official launch on January 27. The average price reached was S$1,464 for each square foot.
The monthly installment on a 30 year S$1.095 Million (75 percent of S$1.46 Million) home mortgage with an interest rate of 4% is S$5,228, almost 33 percent of the couple’s S$16,000 annual income. Monthly payments for a loan of 25 years are S$5,780. This is over 36 percent of their monthly income.
The maximum total debt service rate, which takes into account a borrower’s entire monthly debt obligations is also applicable for EC home buyers.
Income ceilings for new EC homeowners should probably be increased from S$10,000 per month to S$20,000. A couple earning S$10,000 would need a S$1.46 million EC home to equal 6.1 times their combined annualised S$240,000.
Their monthly household income is S$20,000. Monthly payments of S$5,228 (26%) and S$5,780 (29%) are around 26 per cent and 29, respectively, of that amount.
In 2023 about 15% of employed residents aged between 15 and 65, excluding those in full-time national services, will earn S$10,000 a month or more as gross income, excluding contributions from employers.
Maximum unit size
Developers can limit the size that they build to new EC houses. This could help young adults who are not receiving parental help in purchasing a home.
Lumina Grand has 51 five bedroom units ranging between 1,496 and 1,711 sq ft.
A 1,500-square-foot EC costing S$2.15m is around 11.2 times a monthly income annualised of S$16,000 or nine times a monthly income annualised of S$20,000.
Depending on the price per square foot, a home of 1,200 ft2 would cost around S$1.75m. This is equivalent to 9.1 times or 7.3 times annualised monthly salaries of S$16,000 for a home and S$20,000 for a house.
HDB BTO offers many young Singaporeans the opportunity to own a home at subsidised rates.
The EC represents a hybrid between public and private housing. ECs can be built by private developers on 99-year leasehold property and feature condo amenities.
Buyers of ECs can be couples made up of two Singapore citizens (or a Singaporean citizen and a resident permanent) or single citizens who are 35 years and older.
A minimum five-year occupation period is required for new EC buyers. During the time of this period, the unit cannot be rented out or sold. After five year, the EC can be rented, sold, or leased to Singaporeans, PRs or foreigners. After ten years, the EC units can be bought by anyone – including foreigners – as if it were a private condo.
