, Singapore
11 views

10 most profitable executive condos after privatization

6 of them have gains fetching over 100%.

Buying an executive condo and leaving it empty for the first 5 years seems an inferior investment compared to buying a private condo and renting out. Despite the higher condo price tag, net holding costs are lower due to rental income. However, a study by property consultancy firm OrangeTee proves that in the longer term, the EC would prove to be a better investment. OrangeTee's analyst Celine Chan explains that this is mainly due to the lower initial purchase price and the inflow of cash due to rental income (year 6 to year 10) as restrictions are lifted.

With current measures cooling the market, EC prices have come off their peaks. EC prices have started to move towards to $750 to $770 psf range. Previously only constrained by the Total Debt Servicing Ratio framework (TDSR), new ECs are now bound by a 30% MSR, which has tightened the current demand pool.

Developers have also moved to ensure that new units remain affordable. However, after the 5 year MOP is completed, resale ECs would not be placed under the 30% MSR restriction, and would only be bound under the TDSR framework. This would expand the potential demand pool, and should bode well for EC prices.

According to Celine, based on historical data, first-hand owners of currently privatised ECs are sitting on considerable gains. However, not all ECs are equal. Celine said that depending on the location, available surrounding supply and price, the rate of capital appreciation can differ drastically between projects.

As of February, there are 21 EC developments in Singapore that are over 10 years old and have been privatised. By matching caveats, OrangTee analysed their percentage profits, at the completion of their 5 year MOP and at privatization which is 10 years after completion.

The results show that not all ECs are ‘sure win’ investments at MOP. Out of 21 projects, 13 projects made a loss after MOP completion, and the remaining 8 projects managed gains of over 20%. Market timing was the main differentiating factor between the ‘losers’ and ‘winners’.

The 13 projects that sold at a loss at MOP, were launched during 1996 to 1999, just before the Asian Financial Crisis, when property prices were at their peaks. Projects which were launched during 2001 to 2005 - a period of sluggish growth, managed to achieve returns of at least 25% at MOP. These projects benefited from the subsequent upturn of the Singapore property market.

At privatization, all the EC projects were profitable but here are the developments which stood out:
 

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Get Singapore Business Review in your inbox
They failed to properly monitor individuals onboarded as advisors, directors.
Chua spent 18 years with UBS Wealth Management prior to his new role.
Private-sector economists polled by the Monetary Authority of Singapore expect higher growth, faster inflation in 2021.
The leading F&B establishment operator expands its retail line of condiments and flavourings.
This deepens SGX’s partnership with Nikkei Inc.
These three stocks saw significant growth in trading turnover year-to-date.
The project with a 280-bed capacity is expected to operate by 2022.
Singapore Airport Terminal Services saw the sharpest decline during Monday's trading, with a 1.21% drop.
And the G-7 states demand a probe on the origins of the COVID-19 pandemic.
Approximately 35% of MSEs in the F&B and retail sectors saw their earnings drop by more than half during the Phase 2 Heightened Alert period, according to a DBS survey.
Enterprise Singapore extends the programme that supports food and beverage businesses in providing food delivery services.
The Baht 40b debentures were 1.52 times oversubscribed.
The fund was announced at the inaugural CapitaLand Sustainability X Challenge.
Mapletree Logistics Trust saw the sharpest decline during Friday's trading, with a 0.99% drop.
This may be one of the last times the troubled water treatment firm could meet with securities holders before shutting down.