CBRE study: Executive Condominiums prices up 63%

A CB Richard Ellis study shows prices of Executive Condominiums (ECs) rode on bullish private residential market, causing the surge in their median resale prices by 63 percent in two years.

In the report released by CBRE, caveats lodged for ECs in the resale market in October 2009 showed prices at $519 per square foot (psf), 63 percent higher from the bottom of market in Q3 2006 when ECs in the resale market were sold at $319 psf.

Based on caveats lodged between 2004 and early 2007, median EC prices in the resale market fluctuated within the $300 psf – $400 psf price band, bottoming out at $319 psf in Q3 2006.

Li Hiaw Ho, Executive Director of CBRE Research said, "Our analysis shows that buyers who bought new ECs at various periods from 1996 when EC prices hovered at around $400 psf should benefit from the price appreciation in the last two years. The residential market run-up of 2007 lifted new EC prices to above the $500 psf mark. Currently, a 14 percent price gap exists between the median prices of ECs and mass-market nonlanded projects in the resale market."

In comparison, the resale median prices of private 99-year leasehold non-landed homes bottomed out at $366 psf in Q1 2005, before climbing up relatively steadily until they reached $601 psf in October 2009. In contrast with the new home market, this gap is much lower than the 25–35 percent that had typically existed between new ECs and new non-landed private condominiums when ECs were launched.

At the peak of the market in Q1 2008, the median price of new 99-year leasehold private non-landed homes in similar locations was $825 psf while ECs were $566 psf, reflecting a gap of 31 percent from private non-landed homes.

"Clearly, the 25-35 percent gap between ECs and private condominiums is reflective of the constraints which are initially inherent in ECs, including qualifying conditions, minimum occupation period, restrictions on resale after the first five years, and others," added Mr Li.

Meanwhile, in the recently-announced Government Land Sales programme for first half of 2010, the government placed two executive condominium (EC) sites on the confirmed list and three others on the reserve list. CBRE believes it is a clear signal that the government wants to provide the EC as an alternative housing choice for homebuyers from next year.

The last EC launched was La Casa in May 2005 and it was completed in early 2008. Since then, no new EC projects have been launched as none of the sites offered in the Government Land Sales (GLS) Programme’s confirmed list or reserve list have been sold. In fact, no EC sites were offered from the second half of 2004 – during the global recession – to the first half of 2007. Since the second half of 2007, when the private residential market peaked again, the government has placed up to four EC sites on the reserve list. But none of them have been sold to date.

Going forward, CBRE expects that the tender bids for the two EC sites to be offered in January 2010 on the confirmed list – Buangkok Drive/Compassvale Bow and Yishun Avenue 11 – will be a function of developers’ confidence in the EC market and their pricing strategy. If the price gap between the next new EC project and a new private non- landed leasehold project in the same location is attractive enough, homebuyer demand for EC development will surely return.