Why Buying an Executive Condominium (EC) May Not be a Good Choice?
The first step to getting a new property is to establish what you need, what you want and what you can afford. In Singapore, there are 3 different types of housings:
Public Housing, which is commonly known as HDB flats
Public-Private Hybrid, which refers to Executive Condominiums (EC)
Private Residential Properties which includes non-landed (private condominiums) and landed properties (terraced houses, bungalows, semi-detached houses shophouses and more)
One of the very first decisions that you will have to make is the type of property that best suits you based on your unique situation. Unless you are making huge bucks which gives you the financial ability to purchase a private residential property, most Singaporeans generally consider between HDB flats and ECs.
HDB is always the top housing choice among Singaporeans as it's the most affordable and practical option. On the other hand, ECs are starting to gain more traction during recent years.
Being a hybrid type of property, EC is a unique type of housing in Singapore as it straddles between public and private housing while there is a clear divide between public and private properties for the other types of housing. ECs are built and sold by private developers, which explains the building exterior looking like private condominiums. Like private condominiums, ECs also come with amenities like guarded security, swimming pools, gym and clubhouse. However, they are not as expensive as private condominiums as the cost of the land is partially funded by the government. ECs are regulated and assigned by the government which allows Singaporeans to enjoy subsidies and housing grants when purchasing and EC.
Despite the increasing popularity, we would say that getting an EC may not be a good choice after all. And here’s our take on it.
First and foremost, you must qualify under one of the HDB eligibility schemes here and the income ceiling is $16,000 for couples and $7,000 for singles aged 35 and above.
2. Putting Your EC on The Market for Sales
Selling off your EC differs slightly from the typical private condominiums and HDB flats, these are the terms and conditions you need to follow:
(a) If purchased directly from the developer, EC owners are required to fulfil the 5 years minimum occupancy rule. No renting out is allowed during this period.
(b) After the 5 years is up, the unit can then be put up for sales. However, only Singapore citizens or Singapore Permanent Residents are allowed to purchase.
(c) Only after 10 years then the unit can be sold to foreigners.
If you are after investment opportunities, then getting an EC might not be a wise choice. You are unable to make a huge profit by purchasing a property from the government then sell it off the market when the prices surge. ECs are state-subsidised property with the objective to enhance homeownership for Singapore citizens rather than for investment purposes.
3. Make Your Own Bank Loan Arrangement
If you are purchasing a HDB flat, you can choose to go for HDB loan or bank loan. However, there’s no such option for the purchase of EC. On top of that, you have to fork out more money for the down payment and/or cash/CPF portion, since you can only borrow a maximum of 75% unlike HDB loans where you can borrow up to 90%. And thanks to the Total Debt Servicing Ratio rule, you might not be able to borrow up to 75% if you have other loans like your car loan. Having other existing loans will reduce the amount that you can borrow.
4. Additional Resale Levy Fee
In December 2013, HDB made public that EC buyers are subjected to the Resale Levy (a deduction of subsidies when you purchase a second subsidised property as outlines in HDB’s site), where they are mandated to do a lump sum payment to HDB when they buy their second subsidised property. If the land sale was commenced on or after 9 December 2013, buyers will have to pay a resale levy.
If you noticed, most ECs are located at locations that aren’t near any MRT stations and bus interchanges. This can be quite inconvenient and troublesome if you don’t own a car. And it might not be a selling point if you are looking to sell your EC in the future.
6. High Maintenance Fees
Similar to private condominiums, ECs’ maintenance costs are divided among the management committee, costing approximately $200 per month. The fees are no doubt higher than HDB flats’ maintenance fees which cost typically less than $100 per month depending on the type of HDB flat you live in. If you see your maintenance fees going up to $400 or above per month, that means the your EC estate is not fully occupied, lesser residents are sharing the cost. If you hardly use the amenities within the EC, it might not be a worthwhile deal for you.
At the end of the day, there are no perfect property types in Singapore. Should you require any professional advice before you ballot for any EC, do drop us a message and we are more than happy to assist you to evaluate your needs, wants and financial ability based on your unique situation and narrow down the options available to you.