Compared to 2015, the current year is showing better figures for Executive Condominium or ECs. Preliminary estimates reveal that 3,686 new Executive Condo units were launched from Sep 2015 to Jul 2016, compared to the 3,590 new launch EC unit sales from the same period of the previous year.
During the first seven months of 2016, there were 3,049 sales of new EC units which is more than 2015’s full year sales volume figure of 2,562. The increase in sales figures is mainly attributed to developers decreasing EC prices in 2016. Beginning in the second half of 2015, developers went into the practice of cutting prices for not just unsold stock, but new launches as well. From the standard price of S$800 per square foot that ECs sold for in 2014 and 2015’s first half, the price went down to S$780 per square foot or even less during the second half of 2015.
A run-down of prices for executive condominiums
Projects for ECs had a comeback more than half a decade ago. An executive condominium project is basically private-public hybrid housing geared towards middle-income families. During the early years (2010 to first half of 2013) there was a modest increase of an executive condominium’s launch price from S$700 to S$750 price per square foot. This was an acceptable increase as it was in line with the market’s expectations for residential properties during the said period.
Demand subsequently increased especially after the Total Debt Servicing Ratio (TDSR) framework was implemented in June 2013, moving developers to further raise EC prices during the second half of that year. The rationale behind this was that the TDSR calculations will not include a buyer’s current HDB monthly mortgage during the bank’s assessment for the loan amount intended for an EC unit. Thus, in late 2013 the average price reached S$800 psf from the S$750 psf average at the beginning of the year.
This growth in both demand and price for ECs moved the authorities to impose a cap on the mortgage servicing ratio (MSR) in December 2013. From that month onwards, a homeowner’s monthly mortgage payment for their loan for their EC unit will not go beyond 30% of their gross monthly income.
Faster sales in 2016 for EC projects with sound pricing strategies
In 2016, the Treasure Crest and Wandervale executive condo projects dominated when it came to sales figures. A developer sales survey done in August revealed that Treasure Crest had sold 450 from their 504 units, while customers purchased a total of 433 units from Wandervale EC 534 units.
Treasure Crest EC sales volume was attributed to its enticing pricing strategy, wherein price per square foot averaged in the mid s$700. It surpassed another EC project in Singapore’s north-eastern area called Northwave EC due to its intriguing water-themed living branding strategy. Wandervale had similar results by applying competitive pricing – they also have an average price per square foot at S$700.
In 2016, developers rise above their competition by applying competitive pricing to result in speedy sales for their executive condominiums. This appeals to the current market composed of price sensitive buyers feeling the effects of the MSR cap on EC purchases, as well as the TDSR’s constraints on property loans.
Sale status of EC projects currently on Launch
|Project Name||Street Name||Total Number of Units in Project||Cumulative Units Launched to-date||Cumulative Units Sold to-date||Units Sold in 2016||Median Price ($psf) of units sold in Aug 2016|
|Forestville||Woodlands Drive 16||653||653||650||2||787|
|Sol Acres||Choa Chu Kang Grove||1327||707||557||46||781|
|Lake Life||Tao Ching Road||546||546||533||0||–|
|The Terrace||Edgedale Plains||747||747||525||21||783|
|Skypark Residences||Sembawang Crescent||506||506||501||2||778|
|Sea Horizon||Pasir Ris Rise||495||495||495||1||799|
|The Brownstone||Canberra Drive||638||638||477||15||818|
|Treasure Crest||Anchorvale Crescent||504||504||450||56||745|
|Wandervale||Choa Chu Kang Ave 3||534||534||433||20||763|
|Twin Fountains||Woodlands Ave 6||418||418||418||0||–|
|Bellewoods||Woodlands Ave 5||561||561||408||37||769|
|The Amore||Edgedale Plains||378||378||375||5||781|
|Waterwoods||Punggol Field Walk||373||373||367||1||787|
|The Vales||Anchorvale Crescent||517||517||366||28||808|
|The Visionaire||Canberra Drive||632||632||243||18||807|
|Westwood Residences||Westwood Ave||480||480||242||18||805|
|Signature at Yishun||Yishun Street 51||525||525||151||12||769|
|The Criterion||Yishun Street 51||505||505||133||10||794|
|Parc Life||Sembawang Crescent||628||628||105||8||785|
Source: URA (Developer sale stats as at end of Aug 2016), R’ST Research
Price cuts looms over EC projects for the remainder of 2016
Suffice it to say, that despite the dominance of competitive pricing amongst successful developers, not everyone decreased prices on their executive condo projects. The developer sale survey done in August also showed various EC projects have units that were sold at prices averaging s$800 price per square foot and above. Examples of these projects are The Brownstone EC, The Visionaire EC, and Westwood Residences EC. That said, it is still our belief that developers will continue with the trend of lowering the prices towards the $730 to $780 psf price range for the remaining months in 2016. By the end of the year, it is a possibility that customers won’t see EC units in notable projects selling at $800 psf or higher.
The $700 psf average seems to be a sweet spot; it has been proven to be the most attractive pricing strategy that buyers respond to, making it the industry benchmark at the moment. Recently observed market trends reflect that units pegged at the range of $750 to $780 are the most attractive to buyers, leading to actual sales.
On the side of the developers, it would seem that those with the most experience in positioning and branding their projects are the ones that can afford not to cut their prices. Examples of these are developers behind the likes of City Developments and Frasers Centrepoint – developers focusing on the high end and private residential segments.
But with the easy availability of choices for EC projects, buyer behavior will certainly shift even if they were previously willing to pay premium prices. In fact, it is quite possible that as the year 2016 reaches its conclusion, even these high end developers will budge and cut their prices especially if they have to clear quite a number of unsold stock before the year ends.
Tangible outcome of new EC income ceiling still to happen
In August, it was announced that the new monthly household income ceiling for buying new ECs was revised from S$12,000 to the increased figure of s$14,000. The increase reflects the speculation that there will be an increase in demand for new ECs in direct proportion to the increase in the ceiling. However, this expectation still remains to be seen in reality.
With these considerations, it still remains that as long as new EC projects are in the price range that is 20 to 25% lower than the prices of 99 year leasehold new launch condos located in the same area, ECs will still retain their value proposition.