Offers galore in blossoming EC market

Executive condominium launches in the recent months haev proved attractive to the buying crowd, especially after years of quiet on the ground.

But with 7 more launches planned for the later part of the year, will the market be poised for a saturation point? Or will buyers welcome the competition and options? Most of the new launches will be near existing EC sites in the North and North-east regions, which could mean stiffer competition for the developers.

Westwood ResidencesOne project which may however prove promising is the Westwood Residences in Boon Lay. Together with Lake Life EC, they could the only 2 executive condominiums in Jurong since 2010. The rarity, coupled with the pent-up demand could means buyers may be willing to pay slightly higher than average prices for units here as compared to ECs elsewhere. Property experts are expecting the median prices for ECs launched later this year to hover between $750 to $770 psf.

Currently, the average selling prices for ECs are at around $800 psf. But buyers have not been particularly responsive to this pricing level and with the introduction of thousands of new units over this and next year could bring the competition higher and prices lower. The dip in resale HDB and private condominium prices since the high in 2013, would also mean that ECs have to priced realistically in order to entice HDB upgraders and buyers.

As the market segments react to one another, the EC being hybrid between private and public properties, may also find themselves having to price themselves appropriately between these two market segments.

 

Resale HDB flats – Sales go up as prices do down?

2014 saw a record low number of HDB resale flats exchanging hands. It could be due to the effects of the property cooling measures, in particular the TDSR (Total Debt Servicing Ratio) framework set by the Monetary Authority of Singapore,  just starting to kick in. Buyers were more wary and more careful in weighing their options while sellers were still unwilling to lower prices. The tussle was just beginning.

SeaHorizonECBut this year, it seems one side is starting to give, slightly; especially for those who need to sell their current flat within the stipulated time of collecting the keys to their new flat, or face forfeiting their deposit. Prices of resale HDB flats have dropped 0.8 per cent in March this year, and the number of transactions increase from 1,148 to 1,349., As the number of new BTO (Build-to-order) HDB flats which will be launched this year decrease, buyers may also begin turning to resale flats to fulfil their needs. Prices of four- and five-room flats fell the most at 1.1 per cent and prices have been dropping since a year ago.

Property experts continued to stick to their forecast of a 5 to 6 per cent drop in resale flat prices this year, and hope for a higher sales volume than last year. It all depends on how the market fares from now till June, just before the traditional lull period of the Hungry Ghost Month.

Prices of rare HDB flats such as ECs (executive condominiums) remained high however, in fact showing a rise of 1 per cent last month.

Will adjusting HDB income ceiling help “Sandwich class” own a home?

As earning power climbs, the combined household income for an increasing number of families now fall just above the income ceiling for public housing. This puts them just out of reach of a new HDB flat yet still quite a distance away from being able to afford a private property, especially as inflation and the financial stress of providing for a family kick in.

Forestville Executive Condominium.

Forestville Executive Condominium.

The combined household income ceiling for a new HDB flat currently stands at $10,000 while the same for an executive condominium (EC) is $12,000. The income ceiling was last raised in 2011, from $8,000 to $10,000 for HDB flats and $10,000 to $12,000 for ECs. Over the last five years, there has been a significant increase in the number of couples and families falling into the “sandwiched class” of middle-income households in Singapore. Especially as Singaporeans now tend to marry late in life, when the husband and wife’s earning capabilities are at a certain level which puts them just beyond qualifying for a new HDB flat might be facing the most headaches.

Is there a way around it as public housing was originally aimed at helping those in need. But since there might always be a section of the population who will find public housing out of reach and private housing too much of a financial burden or risk, will raising the income ceiling really help elevate their circumstances only to be a burden to yet another group of citizens? What other options are available for these middle class families? Will they be looking at resale HDB flats as the only viable and affordable option?

Could lower resale HDB flat prices be a good thing?

Although HDB resale prices have dipped 0.6% last month, sellers could  turn the seemingly negative into a positive as this may mean that more buyers will see the market as flattening and be willing to purchase from the resale market instead of applying for a new one directly from HDB.

As HDB has been active in rolling out a massive number of new BTO and EC flats in the past few years to comply to demand from citizens, especially young families and multi-generational families. Even singles now have an option of buying new 2-room flats directly from HDB. Previously they could only purchase from the resale market. The increased supply of HDB flats has meant that more families and young couples have been successful in securing their new HDB flat, leaving less buyers for the resale market.

DoverHDB flatBut may sellers find themselves unable to raise their asking prices by too much as most buyers will be restricted by the TDSR (total debt servicing ratio) line which banks now have to toe. Loans will now be capped at 30 per cent of the gross monthly income. Part of last month’s drop in sales volume and prices could be due also to the Chinese New Year festive season.

Industry experts are expecting prices to drop further or maintain its status quo at least for awhile more. Any rise will be short-lived and a temporary anomaly. It may only be a question of how soon the buyers will return to the market. Are they waiting for prices to lower even further? What will make them change their mind and give them the push to purchase now?

EC prices look set to maintain current level

Recent low winning bids on land parcels may not be enough to lower executive condominium (EC) prices, at least not in the near future.

Most of the ECs which are being built or are nearing their TOP (temporary occupation permit) status are situated on land which were purchase by developers at high prices. Combined with rising construction costs and declining private home prices, prices of ECs may also face pressure. Property experts are expecting a similar 5 to 8 per cent fall in EC prices this year, similar to the prediction for HDB resale market and also the private property market.

TheTerraceECAs the price gap between ECs and private properties narrow, buyers may be swayed to the latter which allows them to immediately sell or rent. ECs, being a hybrid of public and private property, are still subjected to public housing rules which includes a minimum occupation period of 5 years before being allowed to sell. After 10 years, executive condominiums do become private properties.

In addition, developers who have secured land at lower prices may still wish to peg their units to current market levels instead of lowering it at first instance. This gives them the allowance of offering discounts later on.

Buyers who have been holding out for much lower prices may have a long wait.

Resale DBSS flats in demand

With four-room resale DBSS HDB flats at The Premiere @ Tampines going for $570,000 to $590,000, a marked rise from its original $278,000 to $410,000 price tags, interest in newer DBSS launches may continue as resale units just became available last year. Units at The Premiere were the first to come on the market.

The Premiere at Tampines

The Premiere at Tampines

The Design Build and Sell Scheme (DBSS) was suspended in 2011 due to the high prices of flats at The Centrale 8 in Tampines. But since its suspension, majority of units at the existing DBSS projects have been successfully sold. At Pasir Ris One, only 53 units are left, with 88 per cent sold, and owners will be receiving their keys in about a months’ time. Trivelis in Clementi only has 28 units left and is ready for occupation. Lake Vista in Jurong West and Parkland Residences in Upper Serangoon have been fully sold.

Property experts are however aware that the earlier of these DBSS developments were launched when property prices were considerably lower, thus allowing for a higher profit margin. Newer projects may have been launched at higher prices. Coupled with the MSR (Mortgage servicing ratio) cap, this may mean a lower yield for future DBSS resale unit sales. With executive condominiums (ECs) and BTO flats covering the needs of most families, the role of the DBSS may not be as relevant today as before.

But demand seems to be quite positive as there will still be buyers who do not mind paying a bit more for units at a good location and with all the interior fittings and finishings done at no extra costs.

Resale HDB flats – The 2015 outlook

Across the board, property prices dipped slightly last year, and it was the same in the resale HDB flat market. The last month of 2014 showed a 10 per cent fall in prices, and the Minister for National Development, Mr Khaw Boon Wan, has mentioned an estimated single-digit drop in prices this year.

SeaHorizonECResale flats in mature estates are however holding their own. Prices remained resilient mainly due to the rarity of units in these saturated estates and good locations. In non-mature estates such as Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands and Yishun; resale flat prices fell 0.9 per cent in December, while a rise of 0.2 per cent was reflected in the mature estates sales figures.

The price decline was mainly attributed to stricter mortgage servicing ratio limits and a tightening of immigration  policies. Singapore permanent residents are now required to wait 3 years before being allowed to purchase resale flats.

But it were the larger four- and five-room flats which experienced the fall more than three-room resale flats whose prices remained level. And on the higher end of the public housing spectrum, executive flats prices rose 1.8 per cent. As a rare commodity, a hybrid which crosses smoothly from public to private housing, executive condominiums are much sought after. Though the recent close launches of a few EC projects are the same time may have reduced the percentage of uptake per development.

Industry experts are expecting sales to remain low in the first 2 months of 2015, and pick up after the Lunar New Year, perhaps even a slight rebound in the later half of the year.

Executive Condominiums – Now’s the time

If you are a second-time HDB property buyer, and are looking at upgrading from a HDB flat to an executive condominium (EC) – the time may be now. Before the resale levy really kicks in.

The TerraceImplemented in Dec 2013, the levy applies to ECs launched after Dec 9 the same year and as most of the EC launches from now on will be for units launched after Dec 2013, a levy of $15,000 to $50,000 will apply. And that’s no small sum to scoff at.

Executive condominiums have long been the way to move from public to private housing for most middle-class Singaporean families. As young couples now see this as one of the best ways to start their families, competition for the same properties have never been fiercer. As a hybrid between public and private housing, ECs will become private properties following a ten-year period. There is a income ceiling for applicants however, of a combined household income of $12,000.

As bids for EC land plots dip, mostly due to a saturation of launches in the last few months, prices and sales volume may not hold as well moving forward. Currently, ECs which just escape this resale levy include Bellewoods, Bellewaters, The Terrace, Lake Life and The Amore. They each boast their own unique selling point, with unblocked views at The Terrace, basement carparks at The Amore, nature-inspired landscapes at Bellewoods and resort-living lifestyle atmosphere at Bellewaters. Combined with options of units such as penthouses and condominium facilities, it’s the only logical step up for HDB upgraders.