The absence of new executive condominium (EC) launches between now and the second half of next year is unlikely to translate into higher demand for private condominiums, analysts have said.
There will be a lull of six to eight months before the next launch, as a rule introduced in January only allows developers to launch EC units for sale 15 months after the date the sites were awarded, or after physical completion of foundation work, whichever is earlier.
Analysts TODAY spoke to said that, while pent-up demand will likely build up during the absence of launches, there is no direct substitute in the market for the hybrid public-private homes.
“EC buyers usually belong to a certain profile: They are either first-time buyers who want something better than an HDB (Housing and Development Board) flat while still getting a subsidy from the government, or they could be HDB upgraders who find private property to be too expensive,” said Mr Nicholas Mak, Executive Director for Research and Consultancy at SLP International Property Consultants.
“The question is can they wait? If they can, it’s fine because, after the gap, there will be a steady stream of EC launches; if they cannot, they can turn to a number of other options like the resale market or apply for Build-To-Order flats. If they have the budget, they can go for executive flats.”
Some analysts said that aspiring EC buyers are unlikely to shift towards the private property market, as recent land sales have seen developers bidding for sites at very high prices.
This could mean prices of private homes, which have seen a minimal drop despite declining demand, will remain out of reach for HDB upgraders.
“Very few would (switch to buying private property). If they can afford (it), they would have already bought (it) because a private condo is not bound by the Minimum Occupation Period … Upgraders may have families and need at least three bedrooms, and a three-bedroom private property may not be within their budget,” Mr Mak said.
Associate Director of CBRE Research Desmond Sim agreed: “Some EC buyers would enjoy certain subsidies; to go into private property means losing that benefit.”
Therefore, when the next EC project is launched next year, the strong demand that the sector has seen this year is likely to return.
“If Singapore’s economic fundamentals stay intact or show improvement when developers are ready to launch ECs next year, there could well be new benchmark prices,” said OrangeTee’s Head of Research and Consultancy Christine Li.
“Furthermore, data from the resale market show that, once ECs are fully privatised, the price gap between mass market homes and ECs narrows to as little as 5 per cent. This makes ECs even more attractive, as there is potentially higher capital appreciation.”
Enthusiasm for ECs has been highlighted by robust interest in new launches this year: SkyPark Residences, which launched last month, received more than 1,600 e-applications for its 506 units. Similarly, projects such as Lush Acres and Ecopolitan were 1.6 and 2 times oversubscribed, respectively.
SkyPark Residences was the last new EC project launched.
Mr Sim believes that, with such strong enthusiasm for ECs, developers could try to shorten the gap between their land purchases and project launches, so they can exploit the demand while it is still there.
“I think what will happen is that developers who won the EC sites would try to get their launches ready quickly, they can quicken the pace to get the approval done by the relevant authority and start selling,” he said.
Source : Today – 4 Nov 2013