Exactly what are ECs (Executive Condos) Anyway?
ECs are another "sandwich" type of flats, which include HUDC, DBSS, maisonettes, etc. (In terms of sandwich properties, HDB is like the Subway of developers)
Like regular condos, an EC is designed and built by private developers. Therefore, they have pools, gyms, clubhouses.the usual facilities you discover in a condo. But unlike full fledged condos, ECs have a 99 year lease, and are not freehold.
(Also, it's possible to make an application for the $30,000 housing grant for ECs, just like if they were regular flats)
Overall, ECs seem to have a whole lot advantages. But usually there are downsides to consider:
- Higher Down Payment
- The Interest Rate Illusion
- Comparisons to Real Condos
- Location Over Amenities
1. Higher Advance Payment
It's just by the next five years. Besides, there's a lot of iron in this diet.
You can't get a HDB loan for ECs. So unless you've diligently saved for years, your cash flow will back up worse than the toilets at the World Curry Festival.
See, the down payment for any financial loan is a whopping 20%. You need a no less than 5% in cash, and the rest can come from your CPF. Assuming your EC costs $700,000, that comes to $35,000 in cash, and $105,000 from your CPF.
On the other hand, a typical flat (financed by a HDB loan) has a deposit of just 10%. This down payment can come entirely from your CPF, so you need $0 in your bank account.
Although you are able to afford an EC, it is best to question the impact on your financial planning.
If you're a young couple, $35,000 might settle the wedding bill. And if you're between 30 to 35 years old, remember you have other priorities: The expense of a car, of raising children, of insurance fees, etc.
So let me present you with a different option: Pay the wedding bill, live stress-free for five years, then sell the flat and move into a real condo. The early years of a marriage should be happy and stress-free. You should only throw things at each other after the children go to University.
2. The Interest Rate Illusion
For our next trick, we'll make your affordable loan rates disappear.
Right now, ECs are popular because bank loans are popular. The two factors are related.
The current HDB loan has an interest rate of 2.6%, whereas banks have a rate of around 1.5%. The theory is that, if you take a bank loan and sell after five years, you will make more money. After all, you've paid less interest.
This tactic may work for a property investor, who's speculating on the EC's appreciation. But if you're a home buyer, or you're intending to stay for more than 5 years, it doesn't do the job.
The low interest rates are a temporary phenomenon. They're due to American policies like quantitative easing. This keeps the SIBOR rate at a repressed, all-time low. By about 2015 (or even earlier), the bank rates will go back to their historical average of 3% to 4%.
At that point, home buyers will watch their loan repayments double. So if you want to buy an EC for a home, understand this: It's not as cheap as it looks right now.
3. Comparisons to Real Condos
Ever notice real condos are full of fake people?
An EC is just like a real condo, with all the facilities. So when it's time to sell, an EC will attain condo prices, right?
Sure, if we apply logic. But Singapore's property market respects logic like a Chinese factory respects work-life balance. It doesn't matter that ECs also have private developers, or that ECs have the same facilities. They won't fetch the same resale value as private condos.
Here's an e-mail from I got from a property agent, who summarizes the mentality:
"The mentality of Singaporeans is that EC cannot be worth as much as private condo. If resale ECs try to reach condo prices, the private condos will just go up further. If you are a seller, will say 'My private condo should sell at EC price'?"
Let's take a hypothetical situation. Say you want good capital gains, and you're looking at an EC that costs $900,000. You might want to explore private, non-central condos that are close in price. Yes, a $1 million condo has a higher loan repayment; but the resale value might be worth it.
4. Location Over Amenities
I like books I'm able to finish on the train to the office.
Location and cost come first. This should actually be practical sense.
A superb view, a great pool, the ideal gym.these are nice to have. But how are you when you need to get up at six each morning, simply because the office is an hour away? As I recall, it's bad form to stick your mouth under the pantry's espresso dispenser.
Also, don't discount trains and buses, even though you have a car. If your spouse will have to work some day, or maybe the children are far away from school.well merely one person is able to use the vehicle at the same time.
While we're at it, let's discuss resale. Property value, including resale value, is more influenced by location than amenities. The asking price of your property is driven by the district its in. Even when you have the best view, it's difficult to sell your house at 10% in excess of your neighbour's.
Author Resource:
Hong Leong Garden will be revamped into a new mixed development up to 12 storeys of residential and commercial units. You can find out more about other new launches in Singapore at Propertychatter.
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