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Wednesday, September 7, 2011

An EC choice to make

The Straits Times
Sep 7, 2011
An EC choice to make
Exec condos now offer much better value for money than DBSS flats

By Jessica Cheam

THERE is some talk in recent months that Singapore's red-hot property market is finally cooling somewhat, dampened by global economic uncertainty and fears of a property bubble.

But one segment of the market still sizzles: executive condominiums (ECs), which have Housing Board-style ownership restrictions but all the facilities of private condominiums.

Hundreds of people turned up at the launch of the latest EC project, Arc at Tampines, last week to view the showflat before balloting for buyers starts tomorrow for the Hoi Hup Realty-led project.

In July, buyers snapped up 568 EC units - mostly at Blossom Residences in Bukit Panjang and RiverParc Residence in Punggol. The number boosted sales of new private homes, which climbed 40 per cent to 1,954 units, from 1,394 units in June.

The numbers are a stunning turnaround for a type of housing which only a few years ago had so few takers that the Government stopped supplying land for ECs altogether.

ECs were introduced in 1996 to provide a new housing option for the 'sandwich class' of middle-income buyers who aspired to private condo-style living but were unable to afford the prices.

ECs boast facilities of private estates such as swimming pools and a gated community, but are subject to such HDB rules as an income ceiling for buyers and minimum occupation period before they can be sold. They are considered a hybrid of public and private housing on purchase, but are converted into private housing after 10 years, when units can be sold freely, including to foreigners.

From the introduction of the scheme till 2005, 23 ECs were launched, the last at La Casa in Woodlands. Then, in 2005, as the property market dipped, there was a supply glut. Property prices fell across the board. Hopes of massive capital gains for those who bought ECs earlier vaporised. New buyers could also afford private condos, and did not need ECs. This category of housing became unattractive and the Government stopped releasing land to build ECs.

The HDB was also just launching its Design, Build and Sell Scheme (DBSS) to let private developers build and sell public housing, promising home-buyers more innovative designs.

Analysts even said then that the Government may scrap ECs if DBSS proved successful since both types of housing target the same group - young families from the middle-income group.

How things have changed in five years. Today, it is ECs that are popular and the DBSS scheme that has become unattractive.

The HDB is reviewing the DBSS programme. National Development Minister Khaw Boon Wan has suspended all future land sales for DBSS projects, even while 11 sites have been sold as EC projects since last March.

Why the reversal of fortunes?

First, the perception now is that ECs offer much better value for money. Private property prices have climbed to record highs and put homes out of the reach of many aspiring HDB owners, but some ECs remain affordable.

The Arc at Tampines may have set new records for EC prices at slightly above $700 psf. But it is still much cheaper than similar mass-market condos in the area such as Waterfront Gold, launched at just below $1,000 psf earlier this year.

One reason for the lower prices is that under HDB rules, only families who are citizens can buy ECs. There is an income ceiling, which was recently raised from $10,000 to $12,000 a month. First-time buyers also qualify for various housing grants.

In contrast, DBSS flats have been priced at a big premium over new subsidised HDB flats, which are their competitors. The Centrale 8 project in Tampines was priced in the $600 psf to $700 psf range - almost double that of comparable build-to-order (BTO) HDB flats.

Secondly, resale conditions favour buyers of ECs. After five years, DBSS flats become HDB resale flats, which are subject to HDB ownership restrictions which change from time to time. The latest rules prohibit foreigners and private property owners from buying HDB resale flats. In contrast, ECs eventually become private property, which can be sold to any Singaporean after five years, and to foreigners after 10.

An EC buyer thus competes with fewer people when buying a unit; but can sell the unit after five years to a much wider pool. This explains their capital gains after the property market rebounded. Many EC projects were launched in the $360 to $460 psf range. They fetched an average of $683 psf from June to date on the open market when sold, according to Credo Real Estate's head of research Ong Teck Hui.

For example, Westmere, an EC in Jurong, was launched in 1996 at $400 psf. This year, its resale transactions averaged $707 psf - a price appreciation of 77 per cent. In its vicinity, the average price of private condominium Parc Oasis rose from $666 psf in 1996 to $760 psf this year - a 14 per cent increase.

This has reinforced buyers' perception that, barring a crash in the market, ECs are a 'sure win' proposition.

The factors underpinning the rise of ECs and the decline of DBSS - and the clear preference of buyers today - raise the question of whether the Government should just let the DBSS scheme lie fallow and release more land for ECs.

In the past, the DBSS scheme was conceived as an experiment to outsource development of public housing to the private sector, leaving the HDB to eventually assume a more 'regulatory role'. But this policy objective is less relevant today, as Singaporeans want affordable public housing provided by the state, not pricey private developers.

The right mix of public and private housing for Singapore may well be a simple one: new subsidised HDB flats on one end of the spectrum; private property on the other; and executive condominiums as the in-between class, catering to the aspirations of middle-class HDB upgraders.


DBSS and EC: Eligibility for loans and grants

Lots of us are pretty confused over the new rules regarding HDB's Design, Build and Sell Scheme (DBSS). Do we qualify for this loan, that grant and so on? Is it any different from executive condos (EC)? Here's a quick breakdown of DBSS and ECs rules and requirements.

Changes to the rules
The income ceiling for DBSS has been raised from $8,000 to $10,000. This group will also be eligible for CPF grant. However, HDB loans are only offered to DBSS buyers whose combined income is below $8,000. There are NO changes to rules regarding EC.

Firstly, what's DBSS and what's the difference between EC and DBSS?
DBSS are considered public housing, but designed, built and sold by private developers. Once the development is complete, HDB takes over the administration of the development. More details regarding DBSS here. Example of a DBSS - The Peak @ Toa Payoh. DBSS goes for around $500k-$600k.

EC are private condos with some HDB strings attached, the key string being the minimum occupation period. In short, after the 5th year of occupation the owner can only sell their unit to a Singaporean or a Singapore PR. After the 10th year, anyone including foreigners can buy the unit. More details regarding ECs here. Example of an EC - Bishan Loft. EC goes for around $700k to $800k.

Our combined income is less than $8,000, do we qualify for a HDB loan and/or CPF grant?
DBSS: Yes for HDB loan. Yes for CPF grant.
EC: No HDB loans are given for ECs. Yes for CPF grant of $30,000.

Our combined income is between $8,000 to $10,000, do we qualify for a HDB loan and/or CPF grant?
DBSS: No HDB loan. New rules - YES for CPF grant.
EC: No HDB loan. Yes for CPF grant.

Our combined income is more than $10,000, do we qualify for a HDB loan and/or CPF grant?
DBSS and EC: Sorry, you can't buy DBSS and EC. They are only for incomes of $10k and below.

When will these new rules apply?
They will apply to DBSS projects launched in 2010.

So are there any DBSS projects launched in 2010 so far?
None so far. But look forward to Tampines and Yishun coming your way soon.

Any ECs available in the market?
There will be plenty coming in the next few months. Look out for ones in Sengkang, Buangkok and Yishun.

Sure or not? We need more info!
If you need to know more, simply call the HDB hotline and speak to the customer service officer: 1800 8663 066 begin_of_the_skype_highlighting 1800 8663 066 end_of_the_skype_highlighting (lines are pretty busy at the moment, but keep at it!)

As posted in h88.com.sg by John
Posted by Lawrence at Monday, August 30, 2010
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