EC vs BTO: Which offers better value for Singaporean home seekers?

BTO flats require a 10% down payment, whereas ECs require 25%.

Choosing between a Build-To-Order (BTO) flat and an Executive Condominium (EC) amidst the recent wave of property launches in Singapore can be a tough decision.

In a report, DBS advised considering one’s goals, housing supply, affordability, and resale conditions when choosing a property.

Supply

Build-to-order (BTO) exercises in Singapore occur three times a year, with the latest October exercise launching 8,573 units.

The supply of Executive Condominiums (ECs), however, is significantly more limited, with only one or two projects launched annually.

Affordability

In terms of affordability, DBS said BTO flats require a lower initial down payment of 10% of the purchase price with an HDB housing loan.

For ECs, buyers must make an initial payment of 25%, financed with a loan from a financial institution.

"Given the substantial overall cost, this difference in down payment is significant, so buyers should carefully assess their financial capacity before making a decision," DBS said.

As an example, DBS said the down payment for the priciest BTO unit to date, the $877,000 five-room Central Weave project in Ang Mo Kio, is under $90,000, whereas the down payment for a typical EC priced at $1.4m is almost four times as much, at approximately $350,000.

According to DBS, public housing is generally the most affordable and accessible option in Singapore. However, an income ceiling of $14,000 per month for families and $7,000 for singles applies to those looking to obtain subsidies for new public housing flats.

HDB upgraders who have gained substantial proceeds from selling their flats will likely show interest in ECs, said DBS.

Resale

For those interested in buying a property with resale intentions, DBS said standard BTO flats and ECs have similar requirements, such as a five-year Minimum Occupation Period (MOP).

BTO flats in the Plus and Prime categories, however, come with stricter rules than ECs, including a 10-year MOP, no whole flat rental after MOP, a 6%-9% resale subsidy clawback, income caps for resale eligibility, and a 30% Mortgage Servicing Ratio (MSR) limit for resale purchasers.

DBS said EC resale units offer greater affordability due to no income ceiling and a 55% Total Debt Servicing Ratio (TDSR) limit, attracting a wider pool of buyers, including foreigners and companies.

Goals

If the goal is to get capital appreciation from assets, DBS said ECs are the way to go.

"ECs have the potential for higher price appreciation upon resale compared to BTOs, making them a more attractive investment option," DBS said.

According to DBS, EC projects reaching MOP in 2023-2024 have seen median price increases of 60%-90%, yielding median gains of over $500,000 for a 900 sqft unit.

"The current median unit price of new private launches is a proxy for the resale price of ECs upon reaching MOP," DBS said, citing historical data.

"We found that the current median unit price of new private launches serves as an indication of the resale price of EC units eight years later," DBS added.

In 2016, new private launches had a median price of $1,384 psf, while resale ECs in October 2024 averaged $1,331 psf.

DBS said the trend suggests that the current median price of $2,200 psf for new private launches can help gauge the potential profitability of purchasing a new EC today, provided that household income growth supports future demand.