New ECs Versus Private Condos: Price Gap Widening

The price gap between new executive condo (ECs) and private condos is widening, as rising condo prices have outpaced the fairly steady prices of its public-private counterpart since 2011.

According to a study by STProperty, buyers who bought an EC this year would have saved 31.7 per cent on average over purchasing a private home from developers. This is higher than the 23.1 per cent savings EC buyers would have enjoyed in 2011. This makes ECs a good value proposition to the aspiring sandwiched class who do not qualify for public housing but can ill-afford private condos, STProperty says.

But consultants say the cheaper prices of ECs are simply a function of their selling and renting restrictions, and the fact that they are essentially still government-subsidised housing.

EC buyers have to live in the unit for the first five years, during which they are not allowed to rent out the whole property or invest in other private residential property. After that, the units can be sold to Singaporeans and permanent residents. Only after 10 years will all restrictions be lifted such that they become fully private and can be sold to anyone.

“The (STProperty) data doesn’t exactly capture these limitations. It’s also an opportunity cost,” said RST Research director Ong Kah Seng.

SLP International executive director Nicholas Mak also cautioned that the data may be making “apple to pear” comparisons. It may be skewed by the one-bedroom units (and, therefore, higher psf prices) in some condos, whereas ECs start only from two-bedders.

The savings figure was calculated by taking the difference in median transaction prices of ECs and condos from the start of the year until Sept 10, and dividing this by the median prices of new condos year-to-date. It included only estates where there have been both EC and condo transactions this year.

STProperty’s study also found that EC units resold this year fetched prices close to those of private homes in the open market.

On average, resale ECs have changed hands for 10.5 per cent cheaper than 99-year leasehold condos in the resale market this year – a narrower gap than the price difference of new units.

Source: The Business Times – September 18, 2014

waterwoods ec executive condo site photo 1