Executive Condo or EC for short, are comparable to private condominiums in terms of design and facilities. Built and sold by private developers, they are attractive option for higher income Singaporeans.
Executive Condos (EC) were meant to cater to the ‘sandwich’ class. Those whose household income has exceeded the ceiling for public housing (BTO) but yet are not quite ready to afford a private property.
There have been many talk about how great an investment EC is and some even go as far as to suggest that buying an EC is a no brainer for anyone who qualifies.
Is that really the case?
Do bear in mind that buying an EC does comes with encumbrances and there are certain eligibility conditions to be met. Here are 5 things that you should consider first before deciding if buying an EC (1st hand) is right for you.
- You must meet HDB’s eligibility criteria
Before you can apply, there are certain conditions you have to fulfill. For example, you have to form the ‘right’ family nucleus (with parents, with spouse, etc). And your combined income must not exceed S$14,000.
If your combined income adds up to more than S$14,000, you would not qualify. If you are single, you would not qualify.
To check if you are eligible, you may visit HDB website (www.hdb.gov.sg) for more details.
- You must meet the minimum occupation period (MOP) before you can sell.
HDB imposes a minimum occupation period (MOP) on purchasers of EC. This means that from the date of vacant possession, you are obligated to stay in the property for at least 5 years. During this period, you are not allowed to sell off the property or to rent out the whole unit.
Whereas if you to purchase a private condominium, such rule would not apply. You are free to sell and rent the property as you wish.
And do note that for EC, after the 5 years MOP is up, you can only resell the property to a fellow Singaporean or permanent resident. It is only after 10 years than can you sell the EC to a foreigner.
If your consideration for purchasing is purely as an investment, then perhaps EC may not be that suitable if you wish to retain the flexibility to sell and rent as and when you wish to.
- You pay lesser for an Executive Condo versus a Private Condominium.
Yes. One of the major draw for purchasers of executive condos is the fact that they cost significantly lesser than a comparable private condominium development.
The difference in price vis-à-vis can be as much as 20%.
Yet, you can hardly tell the difference between an executive condo and a mass market private condominium nowadays. They both come with full fledge facilities and are comparable in the quality delivered.
And the best part is this: when you decide to resell your executive condo property after 5 years, the selling price closes in on that of the transacted prices of private condominiums around the vicinity.
- You can obtain only bank loans for Executive Condos.
Even though executive condos are under the HDB umbrella, HDB loan does not apply to executive condos.
You can only borrow a maximum of 80% Loan-to-Valuation (LTV) versus 90% for HDB.
Do also be aware of the Total Debt Servicing Ratio rule as it will impact the amount of loan you can borrow for the purchase of your property.
When in doubt, it is often best practice for you to talk to a mortgage specialist to understand your financial situation before committing to a purchase.
- Resale Levy for 2nd Timers
There might be some of you reading this that are considered 2nd timer. If you have previously bought a new flat from HDB or received a CPF housing grant, you are considered 2nd timer.
Should you decide to upgrade and want to purchase an executive condo direct from developer, you might be liable to pay resale levy. It can be up to S$50,000, depending on the first subsidized flat type you bought.
For executive condos where the land sale was launched before, 9th December 2013, you will not need to pay resale levy. (You might want to check out those developments instead)
Committing to a property is always a big decision for anyone. Not only have you got to first decide if you should go for an executive condo, you then also have to decide upon which development is the best.
There are definitely many pros to buying an executive condo but it is overly simplistic to say that anyone who is eligible should go for an executive condo because you will ‘make money’.
Surely there are many other considerations that come into play as well.
If there are any doubts you wish to clarify, feel free to email us or drop us a call. Our consultants in Lovely Homes will be more than happy to assist.
This article is contributed by Kevin Yeo
PS: Searching for the best EC in the market? Get the latest updates and direct developer discount here