Executive condos gain cachet as resale units generate windfall profits

Copen Grand sold 465 units, or 73 per cent, at prices averaging $1,300 psf at its launch in October, and was fully sold a month later. PHOTO: LIANHE ZAOBAO FILE

SINGAPORE – Executive condominiums (ECs) are gaining cachet with Housing Board upgraders as the gap between the median prices of new ECs and new condominiums in the suburbs has widened in recent years.

ECs are a hybrid of private and public housing built by private developers, but sold at lower prices compared with private condos. They tend to appeal to first-time Singaporean home buyers and, in recent months, to HDB upgraders facing rising interest rates and heightened macroeconomic uncertainty.

This is evidenced by the robust take-up of the 639-unit Copen Grand in Tengah and the 618-unit Tenet in Tampines at their launch dates.

In December, Tenet sold 447 units, or 72 per cent, at an average price of about $1,360 per sq ft (psf). Copen Grand sold 465 units, or 73 per cent, at prices averaging $1,300 psf at its launch in October, and was fully sold a month later.

In 2022, median new EC prices were 33 per cent lower than those of new suburban condos, compared with a 27 per cent discount in 2021, and a 23 per cent discount in 2019, noted Ms Tricia Song, CBRE’s head of research for South-east Asia.

On the other hand, the median price gap between new and resale ECs has been narrowing, as resale EC prices rose at a faster pace than that of new ECs. The discount dropped to 18.5 per cent in 2022, from 28.6 per cent in 2019, noted OrangeTee & Tie’s senior vice-president of research and analytics Christine Sun.

Median resale EC prices gained 31.9 per cent to $1,129 psf in 2022, from $856 psf in 2019. New EC prices, in contrast, grew 21.5 per cent to $1,338 psf, from $1,101 psf over the same period.

But even as buyers took a shine to Copen Grand and Tenet, new EC sales for the whole of 2022 took a hit from rising mortgage rates and a murky economic outlook, dropping 26 per cent to 1,471 units, from 1,983 in 2021.

However, this fall is marginal compared with the 45 per cent plunge in overall new private home sales to 6,850 in 2022, from 12,536 in 2021. In the suburbs alone, sales of new condos fell 42 per cent to 3,946 in 2022, from 6,838 in 2021, according to CBRE.

This is because ECs have become attractive assets, with a profit analysis by OrangeTee finding that more than 450 units yielded $500,000 in resale profit as at Jan 1.

More buyers are finding ECs affordable, especially after new suburban condo prices escalated to over $2,000 psf in the past year, Ms Sun said.

“Given their relatively low entry prices, many ECs have yielded hefty profits in recent years. New EC supply is also projected to be low over the next two years. As a result, demand may stay firm despite the cooling measures,” she added.

OrangeTee’s study is based on a sample of 4,806 caveats mined from a database of 28,009 new EC transactions between 2007 and Jan 1, 2023. The balance of about 23,000 units were either not put up for resale or did not lodge a caveat.

A majority of the sampled 4,806 EC units were resold within 10 years from the purchase date and netted around $314,000 in gross profits each. In 2021, a resale EC unit at CityLife@Tampines snagged a record gross profit of $1.38 million, followed by another unit at The Quintet in Choa Chu Kang, which scored $1.02 million in profit.

Bigger EC units tend to fetch higher profits. The study found that 3,055 units (ranging between 800 sq ft and less than 1,200 sq ft) yielded an average gross profit of $286,621 each, while 1,250 units (between 1,200 sq ft and less than 1,600 sq ft) yielded $384,962 each.

And 184 EC units of at least 1,600 sq ft gave an average gross profit of $473,660 each.

Another pull factor for HDB upgraders? Those buying new ECs need not fork out a 17 per cent additional buyer’s stamp duty upfront if this is their second residential property, but are required to sell their flat within six months after their EC receives its temporary occupation permit (TOP), said Mr Ismail Gafoor, executive chairman and chief executive of PropNex.

Mr Wong Xian Yang, head of research at Cushman & Wakefield, said that though ECs are a lower-priced option compared with condos, there are not many new launches to choose from, and they tend to be in the suburbs.

Due to the hybrid nature of ECs, Ms Song said new ECs are subject to HDB’s minimum occupation period (MOP) requirement of five years from the date of TOP, which restricts owners from selling or renting out their properties and buying another private property during MOP.

Furthermore, they are allowed to sell or rent to foreigners only after their ECs are privatised from year 11 onwards, she added.

While new EC buyers can tap Central Provident Fund housing grants, they also have to fulfil income ceiling limits. So while ECs may offer more bang for the buck, they come with strings attached. 

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