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ECs gain appeal as HDB, private home price gap widens

Easing of rules expected to increase demand for exec condos

THE rising property market has brought executive condominiums (ECs) back from the brink of extinction.

These homes – which are halfway between public housing and private condominiums – suddenly looked much more appealing after rules for buyers were relaxed on Tuesday.

Property consultants now expect that more plots for ECs, such as the 2.27ha site placed on the market on Tuesday, will soon be offered.

The main reason: the widening gap between prices of resale Housing Board flats and those of private condos.

ECs, which come with condo facilities but with sale restrictions similar to those for public housing, were introduced in 1995 to bridge this gap.

They became relatively unpopular, however, after the property market plunged a few years later, making private condos more affordable.

In fact, when the first few ECs hit the resale market in 2004 after the minimum five-year occupation period, many were sold at a loss or at breakeven prices. This was because they were booked when prices were at their peak in 1996.

Many people expected Far East Organization’s La Casa in Woodlands to be the last EC project on the market when it was launched for sale in 2005.

‘Mass market condo prices were in the doldrums, making ECs redundant. Today, that’s a different story,’ said Colliers International’s director of research and consultancy, Ms Tay Huey Ying.

Private home prices surged 22.9 per cent in the first nine months of the year – more than twice the rate achieved by resale HDB flats.

Lower-priced ECs are more attractive now because prices of condos in the suburbs – where ECs tend to be sited – have started to move up significantly. In the July- September period, prices of non-landed homes outside the central region rose 7.9 per cent. Consultants expect this growth to continue.

The easing of EC rules is also expected to increase demand from people looking to move from HDB flats. The HDB removed a hurdle for upgraders by scrapping a resale levy payable by EC buyers who had previously bought government-subsidised flats.

Buyers of new EC units are also no longer barred from buying second new EC units or new flats. In addition, the HDB now requires developers to reserve 90 per cent of units for first-time buyers in the first month of sale.

Although ECs still cannot be sold within the first five years and remain out of bounds to foreigners within the first 10 years, the easing of rules has helped ECs shake off their tag as second-rate condos, said Mr Eric Cheng, the executive director of the HSR property group.

Potential buyers include property agent Lester Tan, 27, who has been living with his parents for the past five years since he got married.

He and his wife started looking for a condo about two years ago, but regretted waiting so long to buy one, as prices have shot up.

He said: ‘We heard that the Punggol EC may be launched, and we are quite excited about it.’

Potential upgraders like Ms Elsie Cheng, 31, are also eyeing the future EC in Punggol. The teacher – who lives with her husband, seven-month-old son and maid in a two-bedroom EC unit in Tampines – is looking to move into a bigger EC.

‘Why pay so much for a private condo?’ she asked.

Knight Frank’s head of research and consultancy, Mr Nicholas Mak, said the changes were likely to raise the proportion of upgraders among EC buyers, from an estimated 5 per cent to 10 per cent, to 20 per cent to 25 per cent.

Developers such as Frasers Centrepoint Homes, which built the Lilydale and Quintet ECs, are optimistic. Its chief operating officer, Mr Cheang Kok Kheong, told The Straits Times: ‘The EC will do well in today’s market as a hybrid property – apartments with condo facilities but without private condo price tags.’

He added: ‘As a reflection of the strong confidence and growth potential of the EC market, we expect to see increased competition in this market segment and more developers taking part in upcoming EC land tenders.’

Buyers hoping to make a quick buck from ECs, however, should take heed. ‘The (full) value of the EC will not be realised immediately but in 10 years, subject to the property market being buoyant at that time,’ said PropNex chief executive Mohamed Ismail.

For now, all eyes are on the EC site in Punggol Field. Estimated to be able to fit about 620 homes, it will be put up for tender once a developer commits to a minimum bid that meets the Government’s reserve price.

The EC units, however, will meet only a small portion of the current demand for new homes. In a recent HDB sales exercise, almost 8,000 families applied for just 400 flats in Telok Blangah, while more than 1,600 applied for 516 homes in Punggol.

 

Source: The Straits Times 22 Nov 07

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