Should I buy EC or BTO or Condo?

Buying An Executive Condominium

Buying any type of residential property is probably the most expensive ticket item in our lifetime.  Besides the primary needs of 'Owning a place called home' , the common questions that are probably in the back of one's mind are:

1.  Should I buy a BTO, EC or private condomimum unit?

2.  Should I Buy an EC Now or Wait?

Read on and decide for yourself if you share my thoughts and whether it is the right time to consider buying one now.  

1. Should I Buy a BTO, EC or Private Condominum?

First thing first, we need to look at the factors that could limit or determine your choice.

1. Eligibility. As BTO and EC are meant for owners' occupation, you must formed a family nucleus and meet the eligibility criteria before you can buy a BTO or EC unit. The eligibility conditions for BTO and EC are quite similar except for the difference in household income level ($12,000 vs $14,000) and housing scheme for single. While a single SC above 35 years of age, earning up to $5,000 per month can opt for a 2 room BTO unit in non-mature estate, you need another SC single (also above 35 years of age) to buy under the Joint Singles scheme for an EC unit, So if you are a single below 35 years of age, your choice is only limited to the private condominium or the resale market.
For private condominum, there is no eligibility condition, it is open to anyone who has the means to purchase.

2. Income Level.   Next, your home options may be limited by the total gross income.  If your monthly total household income is:       (Revised income ceiling w.e.f 24 Aug 2105)
*   below $12,000, all 3 options  (BTO, EC, private condo) are open
*   $12,000 - $14,000, you can only buy an EC or private condo
*   above $14,000, your only option is private condo.

3. Location.  Buying property is mainly about location and it is usually the most crucial consideration.  However, what is important to a person in terms of location may varies from buyer to buyer.  Some may look at surrounding amenities for transport and/or convenience, while others may consider being near to a table-topping school as important.   So if you like a particular location very much, whether it is  a BTO or EC or private condo project, you are likely to go for it (subject to your above eligibilty and income level qualification).

4. Budget.  Another limiting and determining factor would be your budget.   It is prudent not to overstretch yourself in purchasing a property.   Having a budget in mind can help narrrow your options (BTO, EC or Condo) and/or the type of unit choices (1, 2, 3, 4 or 5 bedrooms).   For example, in today market, while a $700,000 budget will enable you to get a good 5 Room BTO unit, you will be stretched to find a good 3 Bedroom EC unit to your liking and be limited to a 1 Bedroom shoebox unit for private condo.  

Going further, if you still have 2 or more options open after considering all the above qualifying factors, you may want to weigh the below pro and cons to help determine the right type of home that best meet your needs.

 

To sum up, if you have to choose between a BTO and EC, it will be a tough call.  It is an easy matter to decide if both BTO and EC projects are located around the same vicinity and are launched about the same time, but in reality this is never so.  The appeal of higher potential capital gain associated with EC may appeal to some.  For others, the BTO option, being 'easier on the pocket' make more sense.

It is an easier choice to decide between EC and private condo.  Unless you aspire to own a portfolio of  properties as investment within the next 5 years, the choice should be obvious.  The 'subsidised housing cherry' is there for you to pick. If you don't pick it now, you may not have another chance if your household income exceed the ceiling threshold.  Besides, once you own a private property, coming back to public housing is difficult  because even if you are still eligibile and had sold off your private property, there is time bar of 30 months before you can apply to buy a new unit from HDB.   


2. Should I buy an EC Now?

Will the EC housing price come down in the near future?

The crystal ball is the only way to future pricing trend and no one knows for certain.  However, we do know for certainty, that there are only 3 ways prices can go in the near future:

a.  Up North.     There is always a positive correlation on unit selling price with land price.   From the chart below, the land price for Punggol/Sengkang ECs has been inching up slowly over the years.  So, if there is no external shock to the economy, it is not wrong to assume that the prices will continue to go up along with inflation and increasing cost of construction.  



 (May 2015 Update)    The chart below showed the correlation on land with launch pricing continuing for the last 3 launches (Bellewaters, Terrace and Amore) in Punggol. However, with the last land award (February 2015) for the Anchorvale Crescent site in Sengkang, launch pricing is not likely to head further north in near future.



b.  Flat.   The successive Government cooling measures have moderated the rate of price increase.  The writing is already on the wall that the era of low interest rates will soon be over.   So even if the prices stay flat, would it be better to commit and lock in at a lower interest rate now than to wait further.          

c. Down South. If EC prices do actually head south in the near future, there is actually less to fear if you buy an EC unit as compared to a private condominium. The reasons being:

  • There is already a pricing differential buffer of about 15 – 30% compared to similar private condominium around the vicinity. This buffer would be higher if you are eligible and had opted to enjoy the housing grant.  
  • EC are meant for owner occupation and any pricing dip would not be as great as  in private condo.  In addition, the minimum occupation period of 5 years is actually a blessing in disguise. It effectively helps to ensure no similar unit from the same project will be in the resale market during the construction plus MOP period (8 years), lowering the risk of margin calls from the bank.

Like stock market, what goes down will eventually comes back. It is just a matter of time before prices turns upward.  The  upturn may happen by the time your unit is fully privatised.   Looking back at history, those who bought  EC around the late 1990s' peak and endured the early 2000s' bottom is probably laughing now to the bank. These privatised unit can now be sold at a healthy profit.


3. Impact of new household income ceiling (from $12,000 to $14,000) w.e.f 24 Aug 2015.? (Aug 2015 Update)

Over the past 2 years, the MSR ruling on loan restriction has limited the demand for larger EC unit that cost above $1 million.  Based on the last household ceiling increase from $10,000 to $12,000 in Aug 2011, it is likely that the bigger EC unit (4/5 Br) demand would be rekindled as the new group of eligbile buyers ($12,000 to $14,000) is likely to opt for a bigger EC unit if they have to switch their choice from a private condo to an EC.  

If you are a 2nd timer applicant, and have been delibrating on the timing to purchase an EC unit, the time to act is now!!  Especially if developer is still offering good discount to clear their existing bigger units. The older EC projects where 2nd timer applicant do not need to pay resale levy will benefit more than the those projects where resale levy is applicable.

While the EC market is back, the private condo mass market is likely to see a dip in demand and its prices heading south at a faster pace.  Then again, any of the cooling measures can be relaxed to engineer a moderate fall.

In summary, property is a long term investment. In land scare  Singapore, its value should appreciate if your time horizon is at least a decade from now.   If buying an EC unit is within your means, my suggestion is to go ahead and booked a unit that best meet your needs.  The earlier you decide, the better will be your chance to find a choice unit and called it 'home'.

Credits: http://www.sgecondo.com
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Phyllis Ho
ERA REALTY NETWORK PTE LTD
phyllis.properties@gmail.com
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L3002382K / R055493Z
+(65) 8868 0680