For many Singaporean families, buying an executive condominium (EC) is akin to getting a golden ticket to owning a private property.

By design, ECs – a public and private housing hybrid – are meant for the “sandwiched class”. Higher household income disqualifies this group from buying a new Build-To-Order (BTO) flat from the Housing and Development Board, but they also find it tough to make the step up to a private residential property. The monthly household income ceiling to be eligible for EC purchase is S$16,000, while that of BTO HDB flats is S$14,000.

ECs present a happy middle for such buyers and unsurprisingly, see healthy demand.

The latest new EC to hit the market, Altura in Bukit Batok, sold 61 per cent of 360 units over its launch weekend at an average price of S$1,433 per square foot (psf). Based on transaction data, there are about 420 unsold new EC units on the market – low compared to other sub-markets. Another Bukit Batok EC is expected to be launched in early 2024.

Compelling product

ECs appeal to buyers for a number of reasons, the biggest draw being their more affordable pricing compared to new private condos. In the year-to-Aug 20 period, the median unit price of new ECs came in at S$1,409 psf, compared to S$2,073 psf for new 99-year leasehold, non-landed private homes in the Outside Central Region (OCR). This makes for a sizeable price gap of 47 per cent (see Table 1).

As the median price of resale ECs creeps up to S$1,257 psf, some may not mind paying slightly more (12 per cent) for a new EC. In recent years, the median unit price of new ECs has also tipped over that of OCR resale 99-year leasehold non-landed private homes – with a price difference of 6.7 per cent so far this year.

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This makes resale OCR condos a viable option, but buyers may still prefer new ECs given their fresh 99-year lease and potential upside on resale.

Buyers may also be eligible for a subsidy of up to S$30,000 under the CPF Housing Grant Scheme when they buy an EC unit from the developer. There are no subsidies for the purchase of private homes.

The potential for future gains is not lost on buyers. Past trends show first owners of new ECs making healthy profits when they resell the EC either after the five-year minimum occupation period (MOP), or following full privatisation of the EC project 10 years from its completion date.

Search for capital gains 

Assessing EC projects built in the past 10 years, the 10 biggest estimated capital gains (excluding stamp duty and other transaction costs) from EC resales ranged from S$840,000 to nearly S$1.2 million (see Table 2), based on URA Realis caveat data up to Aug 20, 2023. The biggest gainer was a 14th-floor unit at The Tampines Trilliant, which was purchased for S$1.23 million as a new project in December 2012 and resold for nearly twice the price in July 2023.

The Tampines Trilliant also booked the highest average capital gains by quantum on a project basis this year, data up to Aug 20 indicated. Out of 21 units sold on the resale market, 19 deals reflected an average estimated capital gain of more than S$670,000 each (see Table 3).

Ease of exit is another advantage in buyers’ minds. Buyers may perceive that new ECs in Tengah, for instance, where thousands of new BTO flats are being built, are likely to enjoy good upgrader demand in the future.

A lower purchase price compared to private condos in the same area could also mean higher rental yields for owners.

Stable demand pool and limited stock

ECs are meant for owner-occupiers at the outset, and many buyers of new ECs are either first-time homebuyers or are upgrading from public housing. They are usually not affected by cooling measures such as the raising of Additional Buyer’s Stamp Duty rates, which targets investors. This ensures a more stable demand pool for ECs.

Meanwhile, HDB upgraders will support EC demand. About 15,750 flats are estimated to exit their five-year MOP in 2023. Currently, up to 30 per cent of units at new EC projects are allocated to second-timers during the first month of public sales launch. Thereafter, they are open to all eligible buyers.

With stronger take-up rates and more stable demand, the EC market could be seen as a safe haven for developers, posing lower risks compared to other private residential sites. In public land tenders which closed in 2023, four private residential plots drew an average of three bids each, while two EC sites garnered eight bids each on average.

One of the EC land tenders – for the Plantation Close site in Tengah – was recently awarded for a record land rate of S$703 psf per plot ratio (psf ppr), besting the previous record set in 2022 by the Bukit Batok West Avenue 8 EC site at S$662 psf ppr. At the time of writing, the bid for the Tampines Street 62 (Parcel B) EC plot is still being evaluated. PropNex expects its land rate could hover close to the S$680 to S$700 psf ppr range.

Limited stock of ECs could contribute to pent-up demand. Typically, only two new EC plots are offered for sale under the Government Land Sales Confirmed List each year. Developers also cannot launch new EC projects for sales booking till 15 months after the date of site award.

Testing affordability threshold?

A rising tide lifts all boats, and EC prices – like those of other housing segments – have increased. Cost-push factors such as high land prices and rising construction costs have also exerted upward pressure on EC prices. Based on caveats lodged, the median transacted price of new ECs came in at S$1.44 million in 2023 till August, climbing from S$1.36 million in 2022 and S$1.23 million in 2021.

As prices inch up, they may soon test the affordability threshold of EC buyers whose access to home financing is curbed by the 30 per cent mortgage servicing ratio (MSR) limit. Taking a monthly household income of S$16,000, interest rate at 4 per cent per annum and a loan tenure of 25 years, the MSR limit means buyers can borrow just over S$900,000 from banks for their purchase. As the price quantum rises, buyers will have to fork out more funds upfront to buy new ECs.

Based on PropNex’s observations, new ECs are still accessible to many buyers, with 65 per cent of new EC transactions so far this year priced at below S$1.5 million, 22 per cent of sales done at between S$1.5 million and below S$2 million, and the remaining 13 per cent at S$2 million and over. Help from parents to children, as well as upcoming proceeds from the sale of their HDB flats could also have factored into buyers’ decisions.

All things considered, ECs continue to be a residential property market darling. They also remain relevant in Singapore’s housing system, as a tool to improve social mobility and offer more options to Singaporean households.

Ismail Gafoor is chief executive and Wong Siew Ying is head of research and content at PropNex Realty