By now everyone already knows that Executive Condominiums, or EC, is a kind of hybrid housing type between public and private.

First built in 1999, ECs offer private condo facilities and are gated and enclosed with security, it also has full condominium amenities like gymnasium, clubhouse, swimming pools, playground, BBQ pits.

Built and sold by private developers, they are sold at a price lower than private homes.

This is due to land prices being subsidized by the Singapore Government.

Also, just like public housing, buyers can use (CPF) and grants if any, to make payments towards a developer for an EC.

This article will share in-depth of some home owners with an investor mindset, and why they choose to buy an EC.

EC Prices are artificially adjusted downwards

Many agents will tell you that you are buying EC at a depressed price. They are not wrong in saying that because the government has pushed EC as a more luxurious form of subsidized housing for our sandwiched class (earning too much to breach income ceiling for BTO, but still out of reach to buy private property).

Many ECs in the past has achieved 10-20% more price growth after their 5-10 years of holding period when compared to similar private properties. The gains are even more pronounced when we look at ECs past their 10 years ages.

Assuming an average growth rate for housing prices in Singapore. It’d be challenging to find another asset class that can help you achieve the kind of appreciation that EC does.

This brings us to our next point.

Buying EC as an asset class purely for capital appreciation: A solid asset class for wealth preservation and capital appreciation

Many EC buyers are actual home owners who either aspire to own private property or is pushed out of the income requirement of $14,000 to be able to qualify to buy a BTO.

However, there is also a more uncommon class of buyers: Buyers who are eligible but are buying EC purely for investment purposes.

Property consultancy firm OrangeTee released a study that in the long run, ECs is a strong property investment.

OrangeTee’s analyst Celine Chan digresses that this is due to the lower initial purchase price because of government intervention and the positive cash flow due to rental income after the 5/10 years restrictions are lifted.

After the slew of property measures, EC prices have started to look tamer. EC prices are trending towards the $720 to $820 psf range.

Previously a big constraint will be Total Debt Servicing Ratio (TDSR) framework, and new ECs are currently bound by a 30% MSR, which has tightened the current demand pool.

This research done by OT research has a clear illustration that although a holding period of 5 years is costly, the overall yield that a typical owner buying a typical unit can achieve up to 7% long term yields.

ECs as sustainable long term investment.

Let’s compare the yields between EC after privatization and a normal private property purchased from the start.

A 20% price depression during launch for EC will also translate to higher rental yields for EC owners.

There are many reviews and studies done on the returns.

However from another perspective, in the event of a market downturn or tightening of demand for rental units, it also means that EC owners can have a much higher threshold to adjust their rental asking prices to be much more competitive than, let’s say, a private condominium owner.

They can achieve the same yield as per a private condominium owner even after adjustment for economic downturns or in the face of a lower labour market leading to lower rental demands.

Superior capital gains

The current Hdb regulations state that buyers of an EC have to endure a holding period of 5/10 years. After 5 years EC owners will be eligible to sell to Singaporean or PR and after 10, a foreigner.

A simple analysis on past executive condominium prices will show the following gains for these previous launches:

Bishan Loft +165% in price appreciation

The 99-years leasehold project located right at Bishan Street comprises of 384 units. The development completed in 2004, Bishan Loft is very near Bishan MRT station, walking distance to Bishan Junction 8 shopping mall and also Macritchie Reservoir Park

The Dew +122% in price appreciation

Location at the junction of Bukit Batok East Avenue 3 and Bukit Batok St 21, The Dew comprises of 248 unit with sizes starting from 2 bedroom units to penthouses.

Nuovo + 110% in price appreciation

Located at Yio Chu Kang/Ang Mo Kio, Nuovo is an 18 level executive condominium project housing 297 units. The project was also completed in 2004 and is near Anderson Primary School and Ang Mo Kio Community Hospital

Park Green +115% in price appreciation

Park Green is a 99-year leasehold condo project located in Sengkang. Total units comprise 368 units. It is also just a few minutes away from Rivervale Plaza, short drive to Hougang Stadium and easy access to Punggol Park.

The Eden at Tampines +110%

This Tampines EC was completed in 2003. Owners can take a 5-minute drive to Changi Airport, Singapore Expo Halls. It is also very near Changi Business Park and the new One World International School.

Therefore, as an unspoken assumption, the EC becomes a private property free of Hdb rules and regulations.

The perfect tool for future housing or retirement plans

Let’s face it. Singapore is a very structured country where policies are very effectively enacted, and the current major party/government in Singapore are highly supportive of home ownership and middle-class self-sustainability.

Most of us will take the path of balloting for a BTO flat while we are young, upgrading to a bigger unit while we enter our 30s to 40s when we have more disposable income and savings for an upgrade.

We have children and then they grow up, then find out that we don’t need such a big space anymore and look towards a downgrade.

Therefore, every step of an average Singaporean’s property decision becomes a very important process because it sets the stage up for future upgrade/downgrade feasibility.

If you were to buy a resale flat which is 30 years old while you are young, after another 20 years, where do you go?

Current markets now in ultra-mature estates such as Balestier, Circuit Road, Whampoa, are facing price stagnancy and even a trending downwards due to the difficulty in getting a buyer.

It is much more difficult for a buyer to buy an old flat due to various reasons, but most will be due to loan and prospects of a home.

Buying an EC provides a fresh 99 years lease, this offers a multitude of possibilities, and the price gains after 5/10 years privatization will provide a lot more routes to an up or downgrade in the middle to long term future.

A risk adverse asset class

Risk-averse property investor shuns risk, and so do their best to stay away from adding high-risk properties (e.g. Sentosa) or investments to their portfolio and in turn, lose out on expected higher rates of return.

While property investors looking for “safer” investments will stick to proven locations (Newton/Novena), they generally have lower yields.

However, for Executive Condominiums, it is a unique class of its own, it is low risk because it is sold at an artificially lower price.

This is because of all the regulations and restrictive policies placed on the EC by HDB and the government.

That turns EC into a potentially high return and low-risk asset class. You are buying at such a price that even if the economy tanks, your damage is still very much buffered due to your initial buying price.

Since TSDR and MSR regulations are in place to make sure that you can afford even before you buy, from an investor point of view, it becomes a highly investible asset class.

Is this too rosy to be true?

From an OT study, based on past sets of data, first-hand owners of privatized ECs sits on very sizeable gains.

Although we have to note that not all ECs are the same. Depending on the development location, current supply and demand of comparable, the rate of capital appreciation can be very different between various projects.

As of date, there are about 21 EC developments in our island that are more than 10 years old and have achieved privatization.

Looking at caveats, OrangeTee has made an analysis of their profits, at the 5th and 10th year milestone.

Compiling the data will show that not all ECs made positive gains after MOP. Of 21 projects, 13 made a loss after MOP at year 5, and the other 8 managed gains of over 20%.

Macro-economic conditions plays a huge role in determining the profits

The 13 projects that achieved MOP and sold at losses was launched by developers between years 1996 to 1999, right before the awful Asian Financial Crisis, that was a time where property prices were peaking.

In retrospect, ECs launched during 2001 to 2005, where Singapore experienced a period of sluggish growth, achieved returns of 25% and above after they reach MOP status.

So, these projects have benefited from the subsequent economic boom and recovery of the Singapore property market.

What now?

If you are currently looking out for an EC for own stay for investment, the newest launch now is Kingsford Waterbay at Upper Serangoon View, developers and agents have boasted this to be the “EC nearest to the City”.

We have a review right here. Or you can contact their developer sales team member at their dedicated hotline: +65 9183 6024.