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A Comprehensive Guide for buying Executive Condo

Updated: Jun 11, 2020



Executive Condo has been a trending topic among property buyers this season. This could be due to its unique properties and it’s been a long time since the market saw launches from the EC segment. This increase in interest is probably also due to the launch of Piermont Grand, OLA and Parc Canberra.


In this post I will share the following about Executive Condo (EC) and hope it will be a helpful resource for those who are looking to purchase EC. You may choose to zoom in to the section that is most applicable for you.


- What is EC and why is it special

- Who is eligible to purchase EC

- Financing EC, Things to note when Purchasing EC

- What are the existing EC launches and what are the upcoming launches in the pipelines


Let’s Dive in



What is EC and why is it Special?


Executive Condo also known as EC is a special class of property reserved for a small portion of the privileged few due to its unique restrictions. ECs are a hybrid type of housing that falls between HDB and private condo. EC has all the characteristic of a private condominium like being built by private developers and come with facilities like swimming, tennis court, clubhouses, swimming pool


The following are some unique characteristics of ECs


  • Buyer Household Income must not exceed $16k

  • Only Locals can purchase the property during its launch, however it will be privatised after 10 years and will enjoy the same status as private condos, which release it from HDB restrictions and can be sold to foreigners

  • Government housing grants can be used in the EC purchase

  • As the land cost is partially subsidized by the government the cost of EC will generally be lower than Private condo in the same location.


The Chart below illustrates the growth in psf prices of HDB and ECs


HDB INVESTMENT RETURNS

EC INVESTMENT RETURNS

Across a 10 year period, HDB prices have grown by 11% while ECs prices have grown by 29%. This makes ECs an attractive option for HDB owners who are looking to upgrade their assets and lifestyle.


Why is it special?



EXECUTIVE CONDO (EC) INVESTMENT STRATEGY

EC has an inverted Funnel Effect.

Due to the nature that there is an income ceiling restriction (lesser buyers eligible) coupled with subsidized prices, it means that oftentimes, EC is very likely purchased at a lower price (limitations to price increase due to smaller pool of eligible buyers) compared to Private Condos with similar finishes and facilities offering.


This very specific restriction means that even if there are buyers who can afford to buy the EC unit may not be able to buy it as their income might exceed the income ceiling.


However, as the buying restriction is being relaxed over the years, more groups of people can purchase the unit.


How does it work?

During Launch: Only buyers who fit eligibility criteria and income does not exceed the income ceiling can purchase the EC directly from developer.


After 5 years from TOP (6th-10th year): The EC unit can be sold at market price to Singaporean and Singaporean PR.


After 10 years: All restrictions are lifted and the EC enjoys the same status as a private condo, and can be sold to foreigners. As such the property can be sold to a bigger pool of buyers.


There is a high probability for EC owners to enjoy a good profit. As shown below in the date below.




Based on URA Caveat matching of 115,610 new leasehold condo & 23,025 new EC transactions transacted from 2009-2018. EC produced the highest percentage of profitability with the lowest average losses at $20,578.


EC is a relatively safe choice for those looking to purchase for their own stay as there is a low chance of losses and good probability for profits. That saying so, you should still be sensitive with the price you enter into the project and type of unit you are buying to avoid paying a much higher price and receive relatively lower value.


Who is eligible to purchase EC


In the previous section I mentioned, local households with an income ceiling not exceeding $16,000 are eligible to purchase a Brand New EC, besides this, there are also other criteria that buyers need to meet. As ECs are basically condominiums that are governed by HDB rules, the HDB schemes for purchase will also be applicable.


The Following are an overview of eligibility conditions to purchase EC


Family Nucleus

  • Public Scheme

  • FIance/Fiancee Scheme

  • Orphans Scheme

  • Joint Singles Scheme


Age

  • At least 21 years old

  • At least 35 years old, if applying under Joint Single Scheme


Citizenship

  • Must be Singapore Citizen

  • Co applicant must be a Singapore Citizen or Singapore Permanent Resident (SPR)

  • If applying under Joint Singles scheme, all singles must be Singapore Citizens


Income Ceiling

  • Combine income not exceeding $16,000


Property Ownership

  • Do not own other property overseas or locally

  • Have not disposed of any property within last 30 months

  • Own/have owned more than 1 of the following

- Flat bought from HDB

- EC/DBSS bought from a developer

- HDB resale flat bought with a CPF Housing Grant


Other Factors to Note


  • When your current HDB/EC have not met the Minimum Occupation Period (MOP), you cannot buy an EC from a developer.


  • For EC unit purchased from developer you have fulfil MOP of 5 years + sell your EC for more than 30 months before you can apply for a New EC




Financing


HDB loans cannot be used for financing EC purchase, you will have to take bank loans.

The maximum loan banks will grant is usually up to 75%, the rest of the 25% payment can in in cash or cpf where minimum 5% have to be cash.


There 2 ways you can finance your EC purchase,

  • Normal Payment Scheme (NPS)

  • Deferred Payment Scheme (DPS)


The Normal Payment Scheme (NPS)


The normal payment scheme also known as progressive payment scheme) is spread out across 10 stages. This is a preferred scheme for buyers who want to enjoy the best price.


Buyers who opt for NPS usually enjoy more discount compared to buyers who opt for DPS

The Stages are as follows:


Stage 1: Option to Purchase

You will pay 5% booking fee and receive An Option to Purchase


Stage 2: Exercise of Sale and Purchase and Stamp Duties

Within 9 weeks from the date of Option to Purchase, you will confirm your purchase by endorsing the Sales & Purchase agreement (also known as exercise of Sales and Purchase) and pay another 15% , this payment can be in cash/cpf.


Buyer Stamp Duty will be payable within 2 weeks of the exercise of the Sales & Purchase agreement, you may use CPF to pay for stamp duty however you will need to pay in cash first and apply for refund later.


Stage 3: Completion of Foundation Work

Payment of 10%

5% can be cash/cpf and 5% disbursed from your home loan (where monthly mortgage payment will begin)


Stage 4: Completion of reinforced Concrete Framework of the unit

Payment of 10%