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2017 Forecast: Dwindling Options for Executive Condo Buyers

Posted by adminnlsg on November 17, 2016
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Parc Life EC is one of the few executive condo located in Sembawang which is launched in April 2016

With the positive market response to the Wandervale EC launch, the market for Executive Condominiums (ECs) was set to a good start in 2016. The 534-unit EC project located in Choa Chu Kang sold 292 units in March, translating to a 55% sold out rate on their launch month. With this figure, they outperformed 2015 launches when it comes to the initial launch results. Two other EC developments located in Sembawang, Parc Life EC and The Visionaire EC, had similar favorable response from buyers. The latter is developed by QingJian while the former is a project of Keong Hong Holdings and Frasers Centrepoint Limited (FML). Despite these developments however, it is forecasted that on the supply side of ECs, there will be a decline in the next few years.


EC choices to hit plateau in 2017

The Government Land Sale (GLS) programme has tapered off the Executive Condo supply due to the slowdown in the EC market. In 2015, there were only three new EC sites released, equivalent to a yield of 1,010 EC units. This figure is 72.6% lower than the seven sites released in 2014 which had a yield of 3,685 potential units.

During the first half of 2016, only one site was released with 635 units yield. However, the impact of the 2016 release is expected to be felt only in 2017 because of the time period between the GLS programme’s release of the site and the date when the project is launched in the market.

On the average, the period of time in between the GLS programme launch of a condo site and its market launch is around 17 months or more. Thus, an EC site released in the first half of 2015 is normally expected to be in the market only on the second half of 2016 or even much later. Another consideration is the average of two months time period between the GLS land tender launch and the awarding of the tender.

It is also worthwhile to note that EC land acquired after January 2013 can only be allowed to launch their units to buyers 15 months from the date the EC site was awarded to the developers, or after the foundation works are completed, whichever comes first. In 2015, there were 3,750 units launched while in 2016, the expected number of units to be launched in the marked is 3,311 units. After 2016, there is an expected marked decline of units launch at around the 1,010 unit benchmark.


Are prices going to be lowered by developers?

While lower prices might be set in order to attract buyers, the price decrease is not expected to be significant or excessive for current EC projects. Here are some of the reasons why this is the case:


1) The expected EC pipeline is already limited, and this remains the case even if new sites will be released. This is because of the 17-month time lag previously mentioned before a project becomes available on the market. This time lag gives current units for sale a comfortable buffer.


2) The anticipated deadlines for Additional Buyer Stamp Duties (ABSD) are expected to be a bit far off in the future for EC developers to be concerned about. Current housing regulations state that developers are required to sell all the units they developed in a residential project, including EC projects, within five years. Failure to do so will result in ABSD charges with interest on their land costs.


EC projects launched in 2013 are now mostly sold out. For projects launched in 2014, the earliest deadline for ABSD would only be in the second quarter of 2018. Additionally, most of the EC launches of 2014 are already sold out by at least 50%.




3) EC demand is still quite healthy even if the offerings have slowed down since 2013. Developers launched 3,750 units and sold 2,550 of them in 2015, resulting in a take up rate of around 68%. In 2013, the take up rate was 107%, while in 2014 it was at 63%. To calculate the average take up rate, divide the number of units sold by the number of units launched across the entire market.


A take up rate of above 100% means that the number of units sold is more than the launches, pointing to sales from units launched during the previous year. While the take up rates are in a decline, EC developers are still posting increasing rates in terms of units moved.


Decline in available unsold inventory also expected in 2017

Executive condos are residential products intended to appeal to the sandwiched class, which is expected to increase in number due to the growth rate of their incomes as well as later marriages. The demand for ECs remains strong despite the market downturn, with location and pricing factored in. However, fluctuation of EC prices is not expected to be that much as developers are not under heavy pressure to sell. With the expected inventory dwindling in 2017 due to lesser number of launches, the elevated levels of unsold inventory at the moment is not exactly a cause for concern. That being said, prospective buyers face the choice of waiting out for attractive prices versus ending up with a unit that is not their initial choice.


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