Executive Condo Review – Is It A Good Investment Property?

What Is An Executive Condo (EC)

The first Executive condo (EC) was introduced by the Housing and Development Board (HDB) in 1997. However, they are more 'atas' (high-class) than HDB flats and are generally comparable to mass market suburban private condominiums. In fact, they are almost indistinguishable from the latter, but are priced more attractively.

In a nutshell, an executive condo is a public-private hybrid housing that caters to middle-income Singaporeans who do not qualify for new HDB flats as their monthly household income exceeds the eligibilty ceiling of $14,000. Yet, they are unable to afford private condominiums.

ECs are developed and sold by private developers but are subsidised by the government. In other words, they are specifically developed for the “sandwiched” class who aspires to live in a property with facilities like swimming pool, gym and clubhouse, similar to what private a condo offers.

In fact, former National Development Minister Khaw Boon Wan once likened them to buying a Lexus at the price of a (Toyota) Corolla. But there are certain ownership restrictions imposed by HDB. These include the following:

• Owners must meet the 5-year Minimum Occupancy Period (MOP) rule before they can sell
• Between the 5^th-10^th year of ownership, they can only sell to Singapore Citizens (SC) and Singapore Permanent Residents (SPR)
• ECs can only be sold to foreigners after 10 years when they become fully privatised
• Owners cannot rent out the entire unit within the 5-year MOP. They must retain at least 1 bedroom for own physical occupation and must register the rental of bedrooms with HDB within 7 days of commencement of lease.

Eligibility Criteria For Purchasing An Executive Condominium

For the purchase of an executive condominium, buyers must satisfy a list of HDB eligibility criteria. These include the following:

• Must form a family nucleus that falls under either the Public, Fiancé/Fiancée, Orphans, or Joint Singles Scheme
• Must be a Singapore Citizen with one other applicant being a Singapore Citizen or Singapore Permanent Resident
• Applicants must be 21 years old, and at least 35 years old if applying under the Joint Singles Scheme
• Gross monthly household income must not exceed $16,000
• Do not own other property overseas or locally, or have not disposed of any within the last 30 months
• Have not bought a new HDB/DBSS flat or EC, or received a CPF Housing Grant before; or have only bought 1 of these properties/received 1 CPF Housing Grant thus far

Please refer to our executive condo FAQ for more information.

Housing Grants for Executive Condos

For eligible buyers of executive condos, they may receive up to $30,000 CPF Housing Grant depending on the level of their monthly household income.

Families whose monthly household income is $10,000 or less will receive the maximum $30,000 housing grant. But those who exceed $12,000 will not get any as they are deemed to be in a better financial position to purchase an executive condo. The amount of EC housing grant given is based on the level of household income indicated in the table below:

Executive Condominium Resale Levy

Do note that EC buyers are subjected to resale levies if they had previously bought a subsidised HDB property, be it a BTO flat or an executive condominium from a developer (where the land sale was launched after December 9, 2013).

Simply put, a resale levy is imposed if buyers:

• Dispose of their HDB-subsidised flat and purchase another HDB-subsidised flat, or
• Dispose of their subsidised flat and purchase an EC from a developer where the land sale took place on or after December 9, 2013

EC buyers will not need to pay a resale levy if they bought:

• A Design, Build and Sell Scheme (DBSS) flat from a developer
• An EC from a developer where the land sale took place before December 9, 2013.
• A resale HDB apartment
• A private residential property

The amount of the resale levy payable will depend on the type of property owned, which could be as high as $55,000, as indicated in the table below:

Financing of Executive Condominiums

EC buyers are not eligible for HDB loans. That means buyers will have to take up a loan from a bank or financial institution.

Unlike a HDB loan which offers financing of up to 80% of the purchase or valuation price of the property (whichever is lower), a bank loan is capped at 75% loan-to-value (LTV).

This means buyers will need to fork out at least 25% in down payment from their own pocket. Out of this, 5% must be paid in cash, while the remaining 20% can be a combination of CPF and cash.

EC buyers are also subjected to the Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR) ruling when taking up financing. For MSR, only 30% of the buyer’s monthly income can be used to service their home loan. As for TDSR, their total monthly debt repayments – which include car loans, credit cards, study loans and hire & purchase agreements, etc – cannot exceed 55% of their monthly income.

Due to the more stringent mortgage financing ruling, the prices of new executive condominiums are capped to a certain extent. This is also to ensure EC buyers do not over over-stretch their finances.

But interestingly, once ECs become partially privatised after their 5-year minimum occupation period (MOP), eligible buyers of resale ECs will be subjected to the less stringent TDSR (more on this later).

Location of Executive Condos (EC)

Nearly all executive condos are found in the suburbs, with the exception of Bishan Loft, which is located within 10km of the Central Business District (CBD). There are several reasons for this.

Lower Land Cost Keeps Executive Condos Affordable

As mentioned earlier, executive condos are typically aimed at the “sandwiched” class such as young graduates and professionals who could easily afford HDB flats but find private properties still out of their financial reach.

To ensure ECs are affordable, the government recognise that the land cost component needs to be low. Therefore, designated EC sites are understandably located mostly in suburban areas. Most are also located some distance from town centres.

Unsurprisingly, executive condos won't be found in prime areas where the land cost is very high. Check out some of the factors to consider when purchasing a property.

Scarcity of Land

Singapore, being an island nation, only has a total land area of 733.1 square kilometres (as of December 2021). This makes it the 178^th largest country in the world out of 197.

With a population size 5.93 million, it has the second-highest population density in the world behind Monaco. Therefore, the scarcity of land is one of the main factors that contributed to Singapore being the second-most expensive housing market in the world after Hong Kong.

This is another reason why most ECs are built in the suburbs where land cost is lower in order to keep prices affordable. But could this render owning an executive condo unattractive? We will address this issue later in this article.

Trade-Off Between Cost And Convenience

Although most ECs are located in the suburbs, not all are far from the town centre, shopping malls, and other essential amenities like food centres and wet markets.

In fact, some are located close to MRT stations, such as Tenet and Altura executive condos. Obviously, these will cost slightly more due to higher land cost that takes into account the convenience their locations offer.

For the majority of ECs that are not near an MRT or LRT station, commuting to work or school may take a little more time. But they may not be necessarily far from the town centre. For example, North Gaia which was launched on 25 April 2022, is only 3 bus stops from the Yishun integrated transport hub and Northpoint shopping mall.

Another is Lumina Grand EC, which is 12-13 minutes walk from the upcoming Tengah Park and Tengah Plantation MRT stations.

Although most ECs are not located in the choicest locations, they are attractively priced compared to private mass-market condos. For example, recent new launches like Lentor Hills Residences, The Myst, and Lakegarden Residences have averaged around $2,100 psf. They are significantly costlier than new executive condos that were launched around $1,400 psf on average.

Although not having a train station nearby may be a trade-off, from a price point perspective, ECs offer a very attractive option and entry-level on your journey in property investment. They also offer a higher standard of living than HDB flats. Moreover, for those who qualify to receive HDB's family grants (see below for eligibility), this will further lower their cost of ownership.

A Property Investment Analysis: ECs Versus Private Condos

Now that we have a better understanding of executive condominiums, next, we will analyse whether they provide a viable investment option despite the ownership and sale conditions placed on them.

To answer this question, let's evaluate the average price performances of ECs versus private condos across Singapore and within districts, as follows:

1. Average price growth of ECs vs private condos in the whole of Singapore
2. Average price growth of an EC (Simei Green) vs a private condo (Eastpoint Green) in District 18 (East)
3. Average price growth of an EC (The Floravale) vs a private condo (The Mayfair) in District 22 (West)
4. Average price growth of an EC (Lilydale) vs a private condo (Yishun Emerald) in District 27 (North)

There are no executive condos in Singapore’s central region due to the significantly higher land cost.

Firstly, let's look at how executive condos have performed versus private condos island-wide. For a fairer comparison, freehold private condos have been omitted from the chart as all ECs are sold with 99-year leases.

As can be seen, executive condos (+202.23%) have outperformed private condos (167.06%) in the latest 20-year period (April 2002 to April 2022).

ECs vs Private Condos in Singapore

Price Analysis of ECs Versus Private Condos in the East, West And North

Next, we will compare the average price performances of executive condos against private condos in District 18 (East), District 22 (West) and District 27 (North) to provide a wider geographical analysis.

Eastvale EC vs Eastpoint Green (District 18)

The above chart is the average price performance of Eastvale EC and Eastpoint Green (East). Both developments were completed in 1999. Since launch, they have gained 91.71% versus 70.20% respectively.

The Floravale EC vs Parc Vista (District 22)

Next, the above chart shows that The Floravale EC and Parc Vista (West) registered an average price gain of 106.42% versus 84.63% respectively. Both developments were completed in 2000.

Lilydale EC vs Yishun Emerald (District 27)

Lastly, the Lilydale EC and Yishun Emerald (North) have registered an average price gain of 107.65% versus 77.61% respectively. They were completed in 2003 and 2002.

Judging from the above charts, executive condos can certainly be good investment properties. In fact, if the family grant received is taken into consideration, EC owners stand to make even higher profits.

Executive Condominiums' Ownership Criteria Have Negligible Impact

Despite the 5-year MOP and 10-year wait to become fully privatised, they seem to have a negligible impact on the executive condo's investment potential. One reason why the ownership criteria of ECs have had little impact can be attributed to the slew of property cooling measures imposed by the Singapore government.

To stamp out rampant speculation in the property market, the Singapore government has introduced a series of property cooling measures over the years, which include the Additional Buyers Stamp Duty (ABSD) and Sellers Stamp Duty (SSD). Hence, it is almost impossible to flip properties for quick profits nowadays, forcing property investors to take a longer-term view.

Financing of Resale Executive ECs

Meanwhile, one interesting aspect of executive condos is that buyers of resale ECs are subjected to the Total Debt Servicing Ratio (TDSR) ruling when applying for housing loans. This is less stringent than the Mortgage Servicing Ratio (MSR) for new EC buyers. In other words, buyers of resale ECs will be able to get more loan financing, thereby increasing the demand pool of property buyers. In turn, this will help to underpin the prices of ECs.

Development of Regional Centres Benefits Executive Condos

Since the early-1990s with the development of Tampines Regional Centre, more have sprouted all over Singapore. These include Jurong East, Woodlands, Seletar, and Changi.

The aim of these regional centres is to decentralise some key industries away from Singapore's Central Business District. At the same time, it seeks to bring jobs closer to where people live. To realise this, under the Land Transport Master Plan, 8 in 10 households will live within a ten-minute walk of a train station by 2030.

Although executive condos have been built in the suburbs, they have benefited greatly from the economic transformation taking place around them. To support the decentralisation of economic activities, many amenities such as shopping malls, schools, hospitals and recreational facilities have been developed to enhance the standard of living.

Essentially, they have become self-contained and there is little need to travel all the way down to the city for leisure or entertainment. Herein lies another reason why executive condos can offer an attractive investment option, with a lower entry price to boot.

The next executive condo to be launched will be Altura EC at Bukit Batok. If you are interested in finding out more, please WhatsApp or Email me for the latest details or to arrange for a viewing.

Effects of New HDB Flat Classifications

During the National Day Rally (NDR) on 21 August 2023, Prime Minister Lee Hsien Loong unveiled changes in how HDB flats will be classified. Replacing the current classifications of mature and non-mature HDB estates will be Standard, Plus, and Prime HDB flats.

These new classifications will take effect for BTO launches in the second half of 2024.

With the new HDB flat classifications, Plus and Prime HDB flats will come with more restrictive ownership and resale conditions. These include the following:

• 10-year Minimum Occupation Period (MOP) compared to 5-year for Standard HDB flats
• Subsidy clawback when resole in the open market
• Can only sell to Singapore citizens (which will limit the pool of eligible buyers)
• Can only rent out rooms and not the whole flat

These changes in HDB flat classifications are meant to encourage home ownership. At the same time, they will help to reduce the "lottery effect" where lucky owners who are able to snag one of these choice HDB flats can potentially reap a windfall when they sell their flats.

As such, these ownership and resale restrictions for Plus and Prime HDB flats could limit their capital appreciation potential. Compared to executive condos, they only need to satisfy their 5-year MOP, after which they can be sold to Singaporeans and Singapore permanent residents, and after 10 years they can be sold to anyone.

If you have any questions about the Singapore property market (HDB or private), please feel free to WhatsApp me for an obligation-free chat.

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