Since the income ceiling was increased, more Singaporeans are at present qualified to purchase EC units, but this has not translated into better sales.
During his National Day Rally address, Prime Minister Lee Hsien Loong declared in August 2015 a slew of new measures meant to affect the property marketplace. This included increasing the income ceiling for couples purchasing executive condominium (EC) units from $12,000 to $14,000. As such, higher-income families (making up another six percent of the people) could now qualify for subsidised housing, and wouldn’t have to overstretch themselves to purchase private property.
But five months following the policy kicked in, the EC marketplace appears curbed rather than excited.
The report said that an estimated 2,562, for the whole year new EC units were sold, compared to the 3,750 units found.
Both are anticipated to produce a total of 1,300 housing units.
Ong Teck Hui, National Manager, Research & Consultancy at JLL, said: “One reason why EC sales have stayed sluggish regardless of the income ceiling increase is the mismatch between costs and buyers’ expectations.
With dropping private residential costs, some prospective EC buyers would be mulling over the chance of purchasing private homes instead of ECs, particularly with the narrowing price difference between the two.”
PropNex broker Edmund Ee concurs this measure ought to be tweaked to help homeowners trying to find a location that is larger.
“With the MSR at 30 percent, HDB upgraders who need larger units are being restricted by the amount of the loan and are determining to hold off on their purchases, since updating to an EC would mean a smaller living space.
“If the MSR is at 45 percent, it is undoubtedly great news for eligible buyers, as they’ll have the ability to get a larger unit.”
But Ong clarified the present MSR rate is a policy concern and ought to be held in place.
“With a lower MSR, buyers will borrow less, which suggests that EC units will need to be priced so. It’s part of the total strategy to keep home costs in check, preserve affordability and prevent excessive borrowing.”
That buyers will likely consider projects where the property sales were started before 9 December 2013, when the opinion took effect. Ee although another concern among HDB upgraders is the resale levy of up to $50,000 for EC units purchased directly from developers, but
With EC buyers becoming more cost-sensitive, Ong doesn’t foresee a pickup in trades in the forthcoming months.
“Under present market states, a solid sales take up at start is very improbable, so new EC projects are simply attempting to reach slow and steady sales improvement in the months after introduction.”
Placing the sandwich class
“They favor ECs as the room sizes are usually larger than private condominiums,” he said.
Ee considers these projects reported better sales because of their closeness to public transportation.
Buyers understand there is a premium to pay for being close to an MRT station, but the cost is undoubtedly lower compared to private condominiums nearby.”
Nevertheless, Ong believes the economic slowdown will continue to put pressure out there, as well as the sole solution to resurrect demand would be to price units more attractively.
More launchings coming shortly
On the basis of the property costs, developers are anticipated to price these three projects more competitively, with estimates that range from about $740 psf to $820 psf, noted Ee.
“As developers become more cost-sensitive, expecting for better takeup rates, new EC costs ought to be at an excellent entry level.”
He added that tough competition from the brand new supply will find developers offering reductions for EC projects which are nearing conclusion.
“Looking at the coming starts, I don’t foresee a sudden spike in the sales transactions of EC units as there’s still plentiful supply in the industry. EC trades should reach around the 2015 amount of over 2,500 units sold.”