Tricon House on Cairnhill Road going for $140 mil
.
When considering investing in condos in Singapore, it is crucial to take into account the government’s property cooling measures. Over time, the Singaporean government has implemented various measures to control speculative buying and maintain a steady real estate market. One such measure is the Additional Buyer’s Stamp Duty (ABSD), which imposes higher taxes on foreign buyers and multiple property purchases. Although these measures may have an impact on the short-term profitability of condo investments, they also contribute to the long-term stability of the market, creating a more secure investment environment. Additionally, staying updated on new condo launches can provide valuable information for potential condo investors in Singapore.
Mr Chong, a retiree, has supported his three sons in setting up their homes. His eldest son bought a private condo while his younger sons bought executive condos (ECs). “If you’re buying an EC at a new launch, it’s a no-brainer,” he says. “Even if you buy shortly after the five-year MOP [minimum occupation period], it’s still a good entry price.”
Chong has experienced both situations. His second son was able to purchase a three-bedroom unit at the 531-unit Hundred Palms Residences, which was launched in July 2017. “He wanted to buy a four-bedroom unit, but those were quickly snapped up,” says Chong. The project, developed by Hoi Hup Realty, received 2,000 e-applications and was sold out on the first day at an average price of $841 psf. Completed in 2019, the EC on Yio Chu Kang Road has seen a 110% price gain in eight years, with units sold at an average price of $1,769 psf in January and February 2021.
Chong estimates that his second son’s unit, which was purchased at launch, has increased in value by about $1 million. This significant capital gain may have motivated many to upgrade to private housing, notes Chong.
Three years ago, when Chong’s youngest son was looking to find his own home, the family sold their 1,260 sq ft, three-bedroom unit at The Interlace, which had been their family home for the past decade. In 2021, the Chongs purchased a 1,399 sq ft, four-bedroom dual-key resale unit at Twin Fountains, a 418-unit EC in Woodlands. The EC, developed by a joint venture between Frasers Property and Lum Chang, was launched in 2013 and completed in 2016.
ECs are only available to Singapore citizens or permanent residents (PRs) at launch and after the five-year MOP. Foreigners can only purchase ECs in the resale market after the 10th year of obtaining the Temporary Occupation Permit (TOP). The dual-key unit provides Chong with the privacy he desires, as he occupies the one-bedroom studio while his son and family occupy the three-bedroom apartment. Each apartment has its own separate entrance, but the main entrance is shared.
Despite the higher upfront costs, buyers are not deterred by the higher prices of ECs, says Lim. This is because there is still a 42% median price gap between similar-sized homes in the EC market compared to 99-year leasehold private condos in the Outside Central Region (OCR), he adds.
EC buyers will now have to shell out a larger cash outlay due to the rising EC prices and caps on loan quantum, says Eugene Lim, key executive officer of ERA Singapore. For ECs, the monthly household income ceiling is $16,000 and buyers have to meet the Mortgage Servicing Ratio (30% cap) and Total Debt Servicing Ratio (55% cap) requirements if they plan on taking a loan. Assuming a 30-year-old EC buyer with a household income of $16,000 and a maximum loan tenure of 30 years, the maximum loan amount they can take on is approximately $1 million, according to Lim. This increase in costs may be offset by the fact that EC buyers do not need to dispose of their existing home before making their purchase, notes Lim. HDB upgraders also do not incur additional buyers’ stamp duty (ABSD) when buying a new EC.
Moreover, EC buyers may opt for the Deferred Payment Scheme (DPS) at a slightly higher purchase price. Under the DPS, buyers are only required to pay a deposit, with their loan deferred until completion of the EC. This way, buyers will not need to service two mortgages while waiting for their new home to be completed. Since there is no ABSD payable and the DPS is available, HDB owners find it easier to upgrade to a new EC. Furthermore, Lim believes that even though three new EC launches are expected this year, they are strategically spaced out across different locations and will cater to the housing needs of Singaporeans across the island.
The median price gap between new ECs and new private condos in the OCR has narrowed in recent years, says CEO of PropNex Ismail Gafoor. Based on data from URA Realis, the gap has narrowed from 49.4% in 2023 to 44.2% in 2024 and to 43.6% in January 2021. Sun attributes this narrowing gap to EC prices rising at a faster pace of 9.6% from 2023 to January 2021 compared to a 5.3% increase in non-landed home prices in the OCR over the same period.