Executive Condominium market makes comeback after 5-year hiatus

Yet HDB upgraders looking for new projects below $900 psf had fewer choices in the first half of 2010.

The Executive Condominium (EC) market looks set to stir when new EC projects are launched over the next three to six months. Four new EC projects in Compassvale Bow, Punggol Field, Buangkok and Yishun yielding some 1,400 units will be launched in the next three to six months. These sites were awarded in the first half of 2010. The government will also be selling another five EC sites later in the year – at Jurong West, Punggol Drive, Elias/ Pasir Ris, Tampines and Segar Road which are expected to launch about another 2,600 EC units.

Executive Condominiums are making a comeback after a hiatus of five years as the government steps in to ramp up flat supply for middle-income home buyers. The last new EC launched was La Casa in Woodlands in 2005, which was completed in early 2008. Its comparatively less expensive pricing is expected to attract a large number of HDB upgraders, according to a CBRE Research report.

Li Hiaw Ho, Executive Director, CBRE Research said, “Given the tender bid prices for the residential sites in recent months, developers are not likely to reduce prices of the new private homes. HDB upgraders looking to buy affordable new homes can look to the new supply of EC units within the next 12 months. Assuming the historical 30 percent gap between private suburban homes and new ECs remain, median prices of new ECs are likely to stay around $650 psf to $750 psf. The prices of ECs will match those of comparable private apartments in the same locations after five years, as they will be treated as private properties.”

Currently, the non- landed, private home market is attracting a lower share of HDB upgraders compared to 2009. HDB upgraders accounted for 36.1 per cent of private non-landed new home purchases in 2Q 2010. At its peak in Q1 last year, the proportion of HDB upgraders reached 63.6 per cent but it has steadily declined below the 10- year average of 44 per cent. In the first half of 2010, HDB upgraders’ share of non- landed private homes was 36.9 per cent compared to 45.4 per cent in the whole of 2009.

The median price of a newly launched, 99- year leasehold private home in suburban locations grew by 26.7 percent from a year ago to reach $824 psf in Q2 2010. The official URA price index also registered a 30 percent gain for overall private condominiums during the same period.

HDB upgraders looking for new projects below $900 psf had fewer choices in 1H 2010 compared to last year. Mass-market projects launched in 1H 2010 were mostly in outlying suburban locations such as Tree House at Bukit Panjang (Q2 10), The Minton at Hougang (Q2 10) and The Estuary at Yishun (Q1 10). In 1H 2009, HDB upgraders had a wider range of mass-market projects to choose from, such as Caspian at Lakeside, Double Bay Residences at Simei, Livia and Oasis@Elias at Pasir Ris, The Quartz at Compassvale and Waterfront Waves at Bedok Reservoir,

8@Woodleigh at Woodleigh, Oasis@Elias at Pasir Ris, Rosewood Suites at Rosewood Drive and Mi Casa at Choa Chu Kang. Other mass-market projects launched in 2H 2009 included Optima@Tanah Merah, Waterfront Key at Bedok Reservoir, The Gale at Flora Road and Wembly Residences at Yio Chu Kang.

Mr Li explained “With the steep rise in prices of new private homes, more HDB upgraders face a bigger burden of servicing huge mortgage loans. The lowering of the housing loan limit from 90 per cent to 80 per cent since March this year also meant that HDB home buyers need to pay more cash upfront. Despite this, potential HDB upgraders can find a less costly alternative with the upcoming Executive Condominiums.”

Executive condos were introduced in 1996 when private home prices were at their peak, to cater to the needs of the “sandwich class”. This group of “sandwich class” refers to buyers who could not afford private properties, but whose household incomes exceed the income ceiling set by HDB for new flats. An EC is similar to private condominiums in terms of facilities and amenities. Buying requirements are similar to those for new HDB flats, except that the monthly household income must not exceed $10,000.

Since 2007, the government has made it easier for first- time buyers and HDB upgraders to own an EC unit. 95 percent of the EC supply will be set aside for first- time flat buyers during the first month of sale. Families who have previously bought a new HDB flat will no longer have to pay a resale levy – ranging from $15,000 to $50,000 – when they buy a new EC flat.