Are executive condominiums (ECs) better investments than private housing?
Some ECs have gone up more in price over the years than private mass market condominiums in the same areas.
Bishan Loft, Woodsvale and The Eden are chalking up higher price gains compared to nearby mass market condos launched during the same periods.
An example will be Pinevale, an EC in Tampines launched in 1997 at $450 psf, has seen an average selling price of $569 psf for its 13 transactions this year – an increase of 26 per cent.
Nearby Hong Leong’s 537-unit The Tropica – also launched in 1997 – has sold at an average of $663 psf this year, an 11 per cent increase from its launch price of $600 psf.
The last EC launch was La Casa in Woodlands in 2005 before Esparina Residences near Buangkok MRT station was launched this month.
ECs are subject to a minimum occupation period (MOP) of five years. After that, they can be sold only to Singaporeans and permanent residents. They become private property after 10 years and can then be sold to foreigners.
They are usually priced up to 25 per cent lower to compensate for these sales restrictions and thus start off from a lower base, experts say.
Since EC owners need to meet a MOP of five years, they might not be able to profit even if residential capital values are on the uptrend.
Mr Png Poh Soon, Knight Frank senior manager of consultancy and research, said that an analysis of the ECs that have met their MOP has shown a 66.9 per cent price appreciation from 2004 to this year.
This is higher than the 51.8 per cent price appreciation in mass market residential homes based off the change in the Urban Redevelopment Authority price index of non-landed properties outside the central region, he said.
‘Interestingly, the price gap of ECs narrowed significantly with nearby properties after the fifth-year mark,’ he said, with location playing a significant part in the rate of price appreciation.
However, some experts say that buying an EC requires some good luck and timing.
Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said that ECs thrive only during periods of high property prices.
‘The quality of ECs is still generally inferior to that of private property. When private property prices decline, the difference in quality will show and ECs will become less popular…So if you need to invest in ECs, you need to time your entry and exit,’ he said.
DMG and Partners analyst Brandon Lee added that historically, EC prices have shot up only when mass market prices increased as demand for mass market condos would filter into ECs that have fulfilled their MOPs.
Knight Frank’s Mr Png added that as the Government launches more EC sites, not all will be equally attractive.
Interested buyers should assess the location of the project, along with how much lower the price of the EC units as compared with surrounding private properties before purchasing.