Expand the pool of qualified purchasers by constructing additional executive condominiums

Sep 20, 2022

The bidding for an executive condominium (EC) site on Bukit Batok West Avenue 5 ended a week ago, and City Developments Limited (CDL) submitted the highest offer of S$336 million, which works out to S$626 per square foot (psf) per plot ratio. This was the highest price received. The biggest offer from CDL was only 0.2 percent more than the next highest offer.

The confirmed list for the H2 2022 Government Land Sales has six sites with private residential components that have the potential to generate around 3,505 dwellings. This includes one EC site in Tengah that has the potential to deliver approximately 495 units.

The EC is a unique combination of public housing and private apartments. ECs, which are built and sold by private developers, offer many of the same amenities as condos. The average executive condominium is located within a gated community that provides security, and typically has a variety of facilities, including a swimming pool, clubhouse, fitness centre, and playground.

There is a minimum occupation term of five years for newly constructed ECs, beginning with the completion of the project. During this time, the EC unit cannot be sold or rented out in its whole. After five years, the Executive Condominium in question may be rented out in its entirety or sold to a citizen of Singapore or a permanent resident (PR). Just like a private condominium, the EC unit can be sold to anybody, including non-citizens, after it has been on the market for ten years.

Build more ECs

To accommodate the growing number of households as well as the preference of many individuals to reside in condos, the government might be able to increase the supply of EC sites.

The rise in the number of households comprising Singapore's resident population is surpassing that of the country's resident population overall. The resident population of Singapore is projected to decrease by 1.4% between the years 2020 and 2021; nevertheless, the number of resident households is projected to increase by 1.3% between 2021 and 2020.

The increase of the resident population was 5.7% between the years of 2010 and 2021, while the growth of resident households was 21.4% during the same time period. The number of people living in resident homes had their average size decrease from 3.5 in 2010 to 3.15 in 2021.

The number of resident households that were living in HDB houses increased by 15.4 percent between the years of 2010 and 2021, whereas the number of resident households that were living in private condominiums and flats increased by 73.6 percent during the same time period.

Considering that the price of a new EC unit is likely to be more than 20 percent lower than the price of a comparable new condominium unit, purchasing an EC unit might be a cost-effective option for individuals to enter the private housing market. These kinds of cost reductions are important, particularly in times when increased interest rates cause a rise in the amount of money owed on mortgages and rising inflation takes away at people's discretionary income.

It is possible that allowing private developers to construct more executive condominiums could help reduce some of the strain placed on the HDB to construct additional flats in order to keep up with expanding housing demand.

As of the second quarter of 2018, there were 34,084 EC units, which represented little more than 8% of the total private housing stock. It's possible that there's opportunity for a significant increase in the proportion of ECs in the private housing stock.

Expand market for EC buyers

Concurrently, you should think about increasing the number of people who are qualified to acquire new ECs.

At the moment, purchasers of EC apartments from a developer are required to satisfy a number of qualifying requirements. For instance, in order to qualify for the Joint Singles Scheme (JSS), all applicants must be citizens. Couples, on the other hand, must either both be citizens or at least one of them must be a PR. In order to qualify for the JSS, applicants need to be at least 35 years old. In addition, the monthly family income of purchasers must be more than $16,000 Singapore dollars. CPF housing grants are available to purchasers of EC apartments purchased from a developer, but only under particular conditions.

The current rules stipulate that individuals who are not married must be at least 35 years old in order to be eligible to own HDB apartments. If a single person wishes to purchase a new HDB apartment, the only option available to them is to purchase a two-room flexi flat in a non-mature community. In addition, individuals living alone are not permitted to purchase HDB flats that are constructed utilising the public housing model for premium locations.

Some younger singles may be able to enter into homeownership more quickly if the HDB policy on the ownership of flats by singles is relaxed in some way, for as by allowing those under the age of 35 to buy new executive condominiums.

Giving unmarried people a leg up in the housing market at an earlier age might help them better arrange their finances and keep them rooted in this area, which is beneficial to both society and the economy. In addition, permitting younger persons who are unmarried to purchase new ECs should not result in an increase in the number of young adults choosing singlehood over marriage.

Consideration should also be given to significantly raising the maximum allowable monthly household income for people purchasing brand-new condominiums.

The increase in the rate of the Additional Buyer's Stamp Duty that will take effect in late 2021 will be applied to all buyers of homes in this country, with the exception of citizens and PRs who are purchasing their first home. This has helped to remove some of the bubble from the market for private homes. In addition, the playing field has become more favourable for residents who are interested in purchasing a private property for the purpose of owner occupancy.

Despite this, the prices of privately owned homes have shown remarkable resilience in 2022. It is possible that one may need to pay more than S$2,000 psf for a new condominium apartment located in the suburbs. A brand-new private home that is around 900 to 1,000 square feet in size and is roughly the same size as a four-room HDB flat may cost approximately $2 million.

A household with a total annual income of S$250,000, which is unable to purchase a new EC unit, would not be able to afford a property priced at S$2 million because it is eight times the annual income of the household. Concern could be felt by certain households when they consider such an affordability ratio.

To broaden the range of housing alternatives open to people, it may be beneficial to consider making the purchase of a new EC unit available to all or almost all of them. This might be accomplished by imposing a very lenient income criterion or by imposing none at all.

Homeownership is prevalent in Singapore, which provides residents with a stake in the nation's economic growth and helps them feel more connected to their communities. It is essential to assist a large number of individuals in acquiring new HDB homes, especially HDB homes in premium districts. Because new HDB residences are subsidised, however, there are rules that must be adhered to in order to make the most efficient use of the limited resources available.

Potential homeowners who are unable to purchase a flat directly from HDB may be entitled to further assistance. Think about finding ways to make it simpler for some of these purchasers to get new air conditioning equipment. It is possible for developers to charge higher costs for newly constructed ECs if a greater number of people with high incomes are qualified to purchase such units. But this may be somewhat compensated for by opening up more EC locations.

Construct a considerable number of additional ECs and broaden access to the opportunity to purchase a brand-new EC in order to provide jittery house purchasers with other options in the face of growing inflation and home costs.