There were 733 unsold units as of September in Sol Acres EC at Choa Chu Kang Grove. By the ninth month of this year, completed units that remained vacant were still at the above 2,000 mark. PHOTO: SOL ACRES
First to third quarter sales this year exceeded last year’s performance for the same time period.
Due to demand from bargain hunters, executive condominiums (ECs) emerge as hot finds in a lacklustre property market, with reduced vacancy rates and percentage of unsold units following declining prices.
TODAY property analysts note that EC median prices fell by 6% from the S$826 per square foot (psf) of the first quarter of 2015 to the S$773 psf recorded by the third quarter of 2016.
EC sales climbed mainly due to declining prices and the upward movement of the eligibility income ceiling. Figures released by the Urban Redevelopment Authority (URA) saw a four year high of 1,398 EC units sold during the third quarter of 2016. Meanwhile, the total sales for the first three quarters of 2016 reached 3,265 units – far exceeding the 2,550 EC units sold for the entire 2015.
In an interview, Eugene Lim, key Executive Officer of ERA Realty, opines that ” With the rise of income ceiling, it will certainly helped to widen the pool of buyers. ECs attractiveness is that there is still a considerable gap between EC prices and private property prices.”
The URA also recorded that the September median prices of EC developments The Criterion EC and Signature at Yishun EC were at S$759 psf and S$798 psf, respectively. Both developments are located at Yishun Street 51. In contrast, a private residential project located at nearby Yishun Close, also sold in September, had the median price of S$1,035 psf – a figure 30% to 36% higher than those of the ECs.
An executive condominium is a hybrid property between public and private housing. This type of property was intended for the sandwich class – those whose household incomes are beyond the public housing ceiling but not enough to afford private property. ECs are built and sold by private developers, with certain criteria to meet for eligibility to purchase and sell, like Housing and Development Board (HDB) flats.
The EC eligibility include having a gross household monthly income that should not exceed S$14,000. This is an increase from last year’s S12,000.
Owners of ECs are tied to an occupation period of at least five years before they can sell their units in the open market. Aside from the occupation period to fulfill, there are also some restrictions that apply for the sale to push through. However, all restrictions are lifted once the unit reaches its 10th year, making it basically the same as a private residence.
Mr Chris Koh, Chris International’s Director of Property says, “Many of the EC’s, whether they are in the north or north-east, are in HDB estates where you can tap into the infrastructure of these estates, such as MRT stations, shopping complexes, schools and clinics. In today’s market, with most of the ECs prices below S$800 psf and with a budget of up to S$1 million, you will be able to get a reasonably-sized unit and it’s an avenue of owning a private property.”
ECs exhibited good sales performance recently, with developers being able to offload unsold units leading to an 18-month low of 3,625 unsold units in September 2016. As a consequence, vacancy rates fell as well to 10.8%, according to data from the URA.
Mr Ku Swee Yong, Key Executive of International Property Advisor cautions against being complacent despite these encouraging news as he points to indications that there is still an oversupply of ECs in the market. He cites that vacant units are still consistently above the 2,000-unit mark during the first three quarters of the year. URA data backs this up: first quarter vacant units were at 2,901, during the second quarter it was at 2,943 units, and during the third quarter it ended at 2,426 units.
“There could be investors who bought not because they want to live there,” adds Mr Ku. “They could be still staying with their parents or somewhere else, have collected keys to the ECs but not moving in. There are many dual-key units in EC developments, so the owner can rent one of the sub-units out, but now that the rental market is not good, many units are left vacant.” For Mr Ku, this indicates that genuine demand for ECs have already been met, meaning there is indeed an oversupply of units.
Owners of EC units cannot rent them out within the minimum occupation period, although they are allowed to rent out rooms within the units during this period.
Mr Lim says that with uncertain macroeconomic conditions and cautious buying climate, prices of ECs will be kept in check.
Developers have to keep prices at a certain level in order to fit the property in with a particular income group. The capacity of buyers to afford a certain property is affected by restrictions such as the income ceiling, as well as the Mortgage Servicing Ratio (MSR). The latter places a cap on housing loans at 30% of a buyer’s gross monthly income.
Developers also have to manage risks that could arise in the time period from the awarding of the site to the date when foundation works are completed and the project is launched.
“The measures have allowed the market to have a breather and time to soak up the excess supply,” Mr Lim further adds. “Developers are pricing to sell now, so it’s a good time for buyers to shop around.”