Buyers in tizzy over possible EC scheme changes

Possible changes to the executive condominium (EC) scheme, hinted at by National Development Minister Khaw Boon Wan recently, have got buyers and developers worried.

Some are bracing themselves for a cut or even removal of Government subsidies for first-time applicants. Others predict the uncertainty could drive up demand for new launches.

Last Thursday, Mr Khaw told participants at an Our Singapore Conversation dialogue that the EC scheme cannot continue as it is.

He did not give details, but noted that EC owners make more profit upon resale than the average flat owner.

"Because their upside in the current property market is so big, the subsidy they earn getting an EC compared to the subsidy that a lower-income family, through a three-room, four-room or five-room BTO... there's a substantial gap," he said.

The minister's comments have made first-timers - like public relations executive Rosemary Lee, 26, who is considering buying an EC in the future - uneasy.

"The subsidies are pretty decent and would be a load off our shoulders, given the rising cost of living," she said.

The EC scheme was launched in 1996, targeted at the "sandwiched" class of home hunters who were priced out of private property. Today, ECs have an income ceiling of $12,000, compared to $10,000 for BTO flats.

First-time EC buyers currently receive a grant of between $10,000 and $30,000, while BTO buyers can get up to $60,000 if they earn below $1,500 a month.

Developers who spoke to The Straits Times felt that Mr Khaw was signalling a potential cut in subsidies. The next EC launch in June - Forestville in Woodlands - could also see greater interest.

Said EL Development's Lim Yew Soon: "Whenever policies change or are likely to, the immediate launches will have the biggest benefits. There's a good chance that buyers may snap up existing ECs to ensure they still receive the grant."

Mr Lim added that developers could also be more cautious and moderate their bids for EC land sites, such as upcoming ones in Punggol Drive and Yuan Ching Road, Jurong.

Meanwhile, property firm GPS Alliance chief executive Jeffrey Hong said scaling back subsidies would hit first-time buyers, which ECs are meant for, the hardest. He also pointed out that the dust had yet to settle in the wake of latest measures aimed at bringing EC prices down.

In January, the size of an EC unit was capped at 160 sq m and dual-key units, which have two entrances, were restricted to multi-generational families.

ECs are marketed and built by private developers. Buyers are subject to a minimum occupation period of five years, but after 10 years, their units become private property and can be sold to foreign buyers.

"It's not right to just look at the profit we make," said engineer Eddy Lau, 40, whose $900,000 EC unit will be ready in 2015. "We also pay more in interest over the years for the EC. For us who are sandwiched, ECs are the only option to upgrade."

Propnex chief executive Mohamed Ismail said that while EC buyers do profit more, they also pay more cash upfront and take bigger loans with interest rates more vulnerable to property market crashes.

Readers also weighed in on straitstimes.com, where a user known as Antono Lee wrote: "People who bought an EC took a higher risk than people who bought a 3-room (Build-to-Order flat). Of course it's only fair that when the market is up they earn a bigger gain and when market is down they suffer a bigger loss."

But lawyer Tan Heng Khim, 53, who had quizzed Mr Khaw about the EC scheme at the dialogue session, felt differently.

"It's not right that buyers who are able to purchase a new EC unit at a million dollars should be getting subsidies. I think it's fair for the Government to relook the scheme," he said.

charyong@sph.com.sg