While some state land tenders this year drew a lukewarm response, the tender by the Housing and Development Board (HDB) for the 99-year leasehold executive condominium (EC) site that can yield some 560 homes in Tampines Street 95 drew five bidders and a top bid by Sim Lian of S$465 million or around S$768 per square foot per plot ratio (psf ppr).
The two highest bids at the tender that closed on Oct 24 broke the record of S$729 psf ppr for an EC site at Jalan Loyang Besar in Pasir Ris that was awarded to CNQC International, China Communications Construction Company and ZACD in August.
Based on the land price, new EC homes at Tampines Street 95 may be launched at S$1,600 psf or more. Might such pricing stretch buyer affordability? A new EC unit of around 980 square feet – roughly the size of an HDB four-room flat – could cost about S$1.57 million or nearly 8.2 times the annualised income of S$16,000 per month.
The EC is a hybrid of public and private housing. Built and sold by private developers, ECS typically sit on 99-year leasehold land and offer condo features.
Those eligible to buy a new EC include couples comprising two Singapore citizens or a citizen and a permanent resident (PR) and joint singles who are citizens and at least 35 years old.
New EC homebuyers are subject to a minimum occupation period (MOP) of five years from project completion, during which the home cannot be sold or rented out whole. After five years, the EC home can be sold to Singapore citizens or PRS, or rented out whole. After 10 years, the EC unit can be sold to anyone – including foreigners – just like a private condo.
Buyers of new ECS must meet a monthly household income ceiling of S$16,000. Also, applicants and occupiers listed in the EC application must not own any private home or have sold any private home in the last 30 months, from the legal completion date, before EC application.
Eligible new EC homebuyers can receive Central Provident Fund Housing Grants, such as a local couple whose monthly income does not exceed S$12,000.
Firm demand
First built in the late 90s, ECS are popular with homebuyers. And their popularity could rise.
A new EC home might cost more than 25 per cent less than a comparable new condo home. Amid high private home prices, the EC may appeal to buyers who are moving from HDB homes or first-time homebuyers who cannot buy HDB Build-to-order (BTO) homes.
Demand for new EC homes can also come from young homebuyers who receive financial help, HDB upgraders who sold their BTO homes for juicy profits, as well as ex-private property owners.
In addition, some homebuyers may choose new ECS over HDB BTO Plus or Prime flats. Under the new HDB framework, BTO projects in more choice locations are classified as Plus or Prime.
ECS vs BTO Plus and Prime units
Buyers enjoy much greater flexibility with a new EC home versus a BTO Plus or Prime flat.
One, the MOP for the new EC home is five years, versus 10 years for a BTO Plus or Prime flat. An owner of a new EC can sell the home after meeting the MOP, which is computed from the date of the Temporary Occupation Permit.
Given household needs change for whatever reasons, homebuyers may not want to be burdened by a longer MOP. Also, with a shorter MOP, a homeowner can invest in a private home quicker. For some people, this means being able to buy a private home without being caught by a lower loan-to-value limit that applies when the loan period extends beyond the borrower’s age of 65 years.
Two, while many homebuyers prioritise buying a home for living, some value may be attached to potentially generating rental income from a home.
One can rent out bedrooms in an EC unit within the MOP and the entire home after the MOP. In contrast, an owner of a BTO Plus or Prime four-room flat can rent out spare rooms only after the MOP, and cannot rent out the entire flat at all.
Three, lighter resale restrictions apply to new EC homes versus BTO Plus and Prime flats.
An EC home can be sold to Singapore citizens or PRS after MOP and to anyone after 10 years. Also, resale EC homebuyers are not subject to meeting a monthly household income ceiling. And a buyer of an EC home from a developer need not pay back any part of the sales proceeds upon reselling the unit.
On the other hand, a couple buying an HDB resale Plus or Prime flat has to comprise at least one Singapore citizen and another citizen or PR. A couple buying, say, a fourroom or five-room resale Plus or Prime flat must meet the monthly household income ceiling of S$14,000.
Moreover, to reflect the higher subsidies given to BTO Plus and Prime flat buyers, subsidy recovery applies upon resale of flats. In October’s BTO exercise, the subsidy recovery rate was 9 per cent for the sole Prime project and between 6 and 8 per cent for the seven Plus projects.
Certainly, an HDB BTO Plus or Prime unit is far cheaper than a new EC home. In October’s BTO exercise, the price for a four-room unit was in the range of S$514,000 to S$694,000 for the Plus project at Bayshore Vista, and S$568,000 to S$759,000 for the Prime project at Crawford Heights.
Still, given the restrictions applicable to BTO Plus and Prime units, some buyers who can choose between BTO and new EC homes may opt for the latter if their finances permit.
Developers bid for housing sites when they are confident in end-user demand as they face severe consequences for not selling out homes in a timely manner. Given firm buyer demand for new EC units, the government should release substantially more EC sites for sale. Sell EC sites in prime districts and the city centre too, with restrictions such as those that apply to BTO Plus and Prime projects.
Ultimately, boosting supply of EC sites can temper EC land prices and new EC home prices, thus benefiting local first-time homebuyers.
An EC home can be sold to Singapore citizens or PRS after MOP and to anyone after 10 years. Also, resale EC homebuyers are not subject to meeting a monthly household income ceiling.
Credit: The Business Times
