I get this question a lot from HDB Upgraders,

"Are the new executive condominiums still worth it with prices higher than $1,100 PSF?"

"I might as well top up to a private condominium!" Some might say.

You are not alone if you are thinking the same too.

Executive Condominiums used to be the bridge between HDBs and Private Condominiums.

Back in the days, one could find an EC going around $750 PSF to $800 PSF, a far cry from today's prices.

Let us look at Punggol and Sengkang, where there are 2 new ECs undergoing construction, Piermont Grand and OLA Residences.

Piermont Grand (Punggol)

3 Bedroom Average Selling PSF $1167

4 Bedroom Average Selling PSF $1135

5 Bedroom Average Selling PSF $1130

OLA (Sengkang)

3 Bedroom average selling PSF $1128

4 Bedroom average selling PSF $1224

5 Bedroom average selling PSF $1197

**Overall EC and Private Condominium Prices in D19 and D28 ( Source: URA)**

As you can see in the charts above, the average price difference of ECs vs Private Condos in District 19 and 28 is about 21.76%. versus a gap of 27.08% in 2011.

**Piermont Grand & OLA versus Overall Private Condominium Prices in D19 and D28 ( Source: URA)**

But if we look at the price of Piermont Grand and OLA Residences, they have narrowed that gap to about 15%.

So, although they are more expensive, there is still quite a big gap between their prices and the average private condominium prices.

Now, it all boils down to the ultimate question.

Can I still make a handsome profit from the new Executive Condominiums?

Let us find out.

The Positives

Going back in time

Before we can tell whether these 2 projects will be profitable, we need some information from previous ECs in the same area to guide how well the ECs have performed generally.

Using only resale transactions as a rule to exclude the new launch hype, ECs in district 19 and 28 have gained 48.91% over the past 10 years!

That is a fantastic return!

Base on this data, executive condominiums have outperformed their private condominium counterparts by almost 20%!

This growth trend, in general, will likely continue for ECs for the following reasons.

Protected Pricing

Executive Condominiums are a special breed of property that limits the buyers by having numerous eligibility criteria.

The income ceiling of $16,000 is the main reason why prices for ECs usually goes up slightly during the sales phase.

Take the case for Piermont Grand.

**Piermont Grand Price Chart (Source: URA)**

Prices had only gone up less than 4% since July 2019, when it first launched.

Developers have to keep the prices at the range where it is affordable to the eligible buyers.

They cannot increase the price throughout the sales period like typical new launch private condominiums or risk having multiple unsold units.

Big pool of future buyers

A 4 Bedroom Premium unit at the Piermont Grand is going at an average of $1.5 Million.

Based on the household income ceiling of $16,000, the maximum loan amount that buyers can receive is $1,068,935. ( Due to MAS MSR regulations. )

That would mean that buyers interested in getting a 4 bedroom unit in Piermont Grand have to come up with close to half a million dollars in cash and CPF monies combined.

But if you are one of the buyers that happen to be eligible based on your income and can come up with the cash and CPF to make this purchase, you will be holding on to a unit that will be highly sought after by buyers who are not eligible.

When the development reaches its MOP, TDSR instead of MSR will be used to evaluate loan eligibility.

That will enable buyers to take up a higher loan amount with a similar or lower monthly income.

This advantage, coupled with the fact that most Singaporeans and PRs will now be able to buy the property without being subjected to the strict eligibility criteria, will significantly increase the pool of buyers.

Fair Playing Ground

Due to the previous point where prices are very much protected, there will not be instances where the buyers at launch have a significant advantage over buyers who purchase later.

All the owners will be able to sell at pretty much the same amount of profit if they choose to sell at MOP.

10 Year Full Privatisation

It may be worth considering that ALL of the previous ECs were profitable at the 10-year mark when it fully privatises.

This opens up the development to an even bigger pool of buyers, which include foreigners and entities.

THE Negatives

While ECs have a significant advantage over regular condominiums, they also come with their set of limitations.

Here are some of them to consider.

5 year Minimum Occupancy Period

Having the MOP limits the possibility of making a quick exit out of the property, which is possible for regular condominiums.

There has been an increasing trend where people are selling their brand new launch purchases right after the Seller Stamp Duty period or TOP.

They are using this method to quickly deploy their funds to another new launch condominium to make the highest capital gains in the shortest time possible.

A regular condominium buyer would be able to buy and sell 3 properties for the same period.

This would not be an option for you if you decide to buy an EC.

Limited Supply to Upgraders

HDB has set a strict rule to developers where only 30% of the available units are open to HDB upgraders or second timers.

This will make the competition stiff and reduce the number of choice units available to you.

As you might know, getting the choice units is the key to profitability, which might affect your chances of a good profit when it comes time to sell.

Lower probability of high gains

With some resale condominiums and ECs going at a similar price range, buyers might not be willing to pay a premium for the newly available ECs.

Buyers will also consider that those first-hand buyers would have enjoyed the highest growth in their first 5 years, and future growth might normalise.

If the price gap narrows too much with the private condominiums, there will not be an incentive for buyers to purchase the resale ECs.

Leasehold depreciating factor

A leasehold property will always face the issue of depreciating value when it reaches a certain age.

Counting from the tenure start date, that would already leave most ECs with around 88-89 years on their lease for the first resale buyer.

When it fully privatises, potential buyers will already be buying into a 15-year-old development, which might be a little too old for specific buyers intending to go into a younger development.

Conclusion

As with all properties, good fundamentals must apply to ECs as well.

It would be best to evaluate the EC as you would any property that you intend to buy, on top of all the considerations that we have discussed.

Factors include distance to MRT, nearby amenities, availability of schools in the vicinity, among many others.

If you are an HDB upgrader, you will also need to consider the resale levy of up to $50,000 that you will have to pay on top of the property's purchase price.

With the current EC prices, it is no longer a no brainer to buy an EC over a private condominium.

I hope that this article has been helpful to identify some factors that you would like to consider before deciding whether or not an EC is suitable for you.