Four 10 Hdb Owners Feel Ecs Still Relevant Pricing Concerns Persist Propnex
PropNex has just announced the results of its 2024 sentiment survey on Executive Condos (ECs) on August 5, which revealed that 44% of HDB owners agreed or strongly agreed with the statement that ECs were still a relevant housing option for middle- and upper-income families.
However, the survey also revealed that 55% of the 1,250 respondents felt that current EC prices were either ‘unaffordable’ or ‘extremely unaffordable’.
According to PropNex CEO Ismail Gafoor, “ECs continue to be popular with homebuyers in Singapore, and new EC projects generally tend to see stronger sales at launch compared with other private condo launches owing to their more affordable pricing.”
ECs were first introduced in the 1990s as a hybrid of public and private homes, catering to the “sandwiched class” – middle- and upper-income households who earn above the household income ceiling for a build-to-order (BTO) flat but are unable to afford the price of private condos. As of 2019, the gross monthly household income ceiling for ECs is $16,000.
Affordability has become a concern, however, with Gafoor noting that the rising prices of new EC projects may make them unaffordable for their target market. According to URA Realis data tabulated by PropNex as of May 2024, the median absolute price of ECs has reached $1.5 million.
However, even for buyers earning at the income ceiling of $16,000 per month, they would only be able to obtain a bank financing of around $909,000 for an EC priced in the middle of the market. This would require them to produce $596,500 in cash or a combination of cash and CPF monies to afford the unit.
To address this issue, the most popular suggestion among respondents for improving EC affordability (58%) was to increase the number of EC sites available for tender in the Government Land Sales (GLS) programme. However, since 2015, only two or three EC sites have been available for tender on the GLS confirmed list, leading to an increase in average land rates for GLS and EC sites.
The average price of development land for ECs has grown from $284 psf per plot ratio (ppr) in 2015 to $712 psf ppr in 2023. The land rate for EC sites reached a new high last week when a consortium of developers led by Qingjian Realty bid $729 psf ppr for an EC site along Jalan Loyang Besar, surpassing the previous record of $721 psf ppr set by Sim Lian Group when they bid for an EC site on Tampines Street 62 last July.
Increasing the supply of EC sites could potentially bring down bid prices and exert downward pressure on EC prices. Other suggestions from respondents included raising the household income ceiling (48%) and increasing the MSR ratio for ECs (39%).
The proposed developments by the Urban Redevelopment Authority (URA) in Tampines are expected to have a positive impact on the educational landscape. From primary schools to tertiary institutions, educational facilities will undergo improvements and new facilities will be introduced to accommodate the growing population. This will not only cater to the needs of the residents, but also uphold high educational standards, which is a crucial factor for families when choosing a place to live. Moreover, healthcare facilities in the area will also be upgraded to ensure top-notch medical care for the residents. Aurelle of Tampines EC will also be a valuable addition to the community with its modern amenities and convenient location.
However, PropNex’s report warns that any policy changes made to address affordability concerns could have knock-on effects. For instance, increasing the MSR from 30% to 40% or 45% could incentivise developers to increase the price of EC units, while raising the income ceiling to $18,000 or $20,000 could lead to more higher-income buyers entering the market and potentially crowding out households with lower incomes.
In conclusion, PropNex has proposed three policy adjustments to improve EC affordability: raising the MSR to be in line with the TSDR framework, increasing the income ceiling, and releasing more EC sites for tender. However, these suggestions must be carefully considered to avoid unintended consequences.
