5 Tips To Spot Winning Investment Properties In Singapore
Investing in real estate is an exciting and potentially lucrative venture. In Singapore, a thriving property market attracts both local...
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TLDR
An overview of the article discussing the benefits of Executive Condominiums (ECs) over private condos in the current real estate market, focusing on affordability, less impact from cooling measures, potential appreciation rates, post-MOP attractiveness, and improved accessibility. It also advises on thorough financial analysis and considering family needs when making property investment decisions.
In the last few years, inflation has seen a steady incline; the property market has been most affected, with prices escalating to never-before seen heights. HDB resale prices have been steadily on the rise for the past 23 months, and areas such as Woodlands and Pasir Ris have even seen their first million-dollar flats.
The government has taken steps to battle the climbing property prices, introducing the Prime Location Housing (PLH) model, amongst other policies and criteria. As such, potential buyers must stay alert when selecting their potential home.
Considering this, if you are mulling over the possibility of buying a second residence or upgrading your home, is an EC a better option than a private condo?
Discover How Executive Condominiums (EC) Could Be A Savvy Investment Choice Amidst The High Inflation And Soaring Property Prices
Here are five reasons why an EC may be the better choice.
1. In Comparison To Private Property, They Remain A More Affordable Option
Although inflation and prices in the real estate industry have been increasing, Executive Condominiums (ECs) remain an economical option, often costing up to 20% less than private condominiums. Not only that, but if you choose to buy an EC, you can qualify for government subsidies which can further reduce the cost of your purchase.
If you and your spouse are both Singaporean Citizens and your combined monthly household income is S$10,000 or less, you can get up to S$30,000 through the Family Grant for ECs. Even if one of you is a second-time applicant, you’ll still be eligible for the Half-Housing Grant of S$15,000 with the same household income.
Housing Grant
Given the current state of inflation, which is eroding homebuyers’ buying power, opting for an EC may be the wiser choice when compared to a condo.
2. The Cooling Measures Have Less Of An Effect On EC
In December 2021, the government imposed new cooling measures to combat the ever-rising cost of real estate, including an increased Additional Buyer’s Stamp Duty (ABSD), a stricter Total Debt Servicing Ratio (TDSR) and a reduced Loan To Value (LTV) limit. Fortunately, Executive Condominiums (ECs) have been largely unaffected by the higher ABSD – and here’s why.
If a homebuyer upgrades to a condo, they will be subject to a 17% Additional Buyer’s Stamp Duty (ABSD) on their second property, as opposed to the 12% levied when purchasing a unit before disposing of their HDB flat. Fortunately, CPF reimbursement and ABSD remission are available should they sell their HDB flat within six months, but the stamp duty will need to be paid upfront.
If you opt for a new launch condo, you may be able to take advantage of deducting the ABSD from your CPF rather than shelling out a huge sum in cash. Although it will temporarily use up your CPF funds, the ABSD can still be a significant amount.
On the other hand, an Executive Condominium (EC) does not require an ABSD, but you must sell your existing flat within six months. This makes an EC the more budget-friendly option as it allows you to funnel the money you’d use for the ABSD towards the purchase price.
3. It Is Said That They Appreciate More Rapidly Than Condos Do
It is often said that ECs can appreciate faster than condos due to their lower initial prices and government subsidies that give them potential for growth. However, this is not always the case; it truly depends on the development in question.
Private condos have been known to outperform ECs, and vice versa, making it impossible to guarantee a certain outcome. If you’re looking to turn a profit, it’s key to consider your purchase price, sale price, and the timing of the market.
Despite initial price discrepancies between ECs and private condos, the gap narrows over time, dropping from an average 20% to 9% and 5%, respectively, at the Minimum Occupancy period (MOP) and once fully privatised after the 10th year. Following this, these homes are open for purchase to Singaporeans, Permanent Residents, foreigners and private companies.
4. They Are Usually More Attractive To Buyers Post-Mop Than When Privatised
In the past, investors would opt to sell their Executive Condominiums (ECs) right upon their privatization on the 10th year after purchase. But, with the new cooling measures in effect, investors have come to recognize that a different investment strategy may be in order — holding the property until its Minimum Occupation Period (MOP) have been reached.
Due to the potential of reaching a broader pool of purchasers (including foreign entities and businesses) upon privatisation, Executive Condominiums (ECs) may be less attractive following the increase in Additional Buyer’s Stamp Duty (ABSD) to 30% for the second property and 35% for any subsequent purchases for these entities.
If they are wealthy enough to handle the increase in ABSD and not be too affected, they will be more likely to consider high-end luxury condos.
Furthermore, developers and companies that had previously bought ECs for enbloc may also be less inclined to buy due to their reduced prospects after the ABSD increase.
That is why, the best time to sell could be just after the MOP. However, owning a EC always gives you the option to sell according to market conditions.
5. Their Locations Are Now More Accessible
To create more affordable housing in the suburbs and decentralise key industries away from Singapore’s Central Business District, the Land Transport Master Plan seeks to make 80% of households live within a 10-minute walk of an MRT station by 2030.
Singapore has seen the emergence of a plethora of amenities, from shopping malls, to schools, hospitals and recreational facilities. Most notably, North Gaia, an EC launched in April 2022 in Yishun, is located just beside Khatib Bongsu Nature Park, providing a great opportunity for recreational activities.
The ease of access to such amenities implies that the demand for ECs is sure to stay on an upward trajectory in the coming years, especially when compared to the past.
Final Thoughts
- Carry out an in-depth financial analysis to guarantee you are making wise decisions for the near future and can confidently stand behind your decisions.
- Also take your timeline and family wishes into account, plan ahead and provide your family with a sense of security so that you can proceed with peace of mind.
If you’re curious about the prospect of relocating to private property and would like expert advice, I’m just a message away!
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