EC concentration in Punggol, Sengkang may hurt future resale market

While the concentration of executive condominiums (ECs) in the north-east region of Punggol and Sengkang has not hurt current demand, analysts warn that buyers may face challenges when they want to resell their units after meeting the minimum occupation period.

Eight EC projects currently under construction in the region are expected to be completed within the next five years. This means that close to 4,000 units that have been sold will be eligible for resale at around the same time, which may create a supply glut in the future, analysts said.

“The build-up (of supply) in Punggol and Sengkang is going to be an issue when the units go into the resale market,” said Mr Ku Swee Yong, Chief Executive of property agency Century 21 Singapore.

For example, when families who have bought in the area have new priorities, such as moving closer to the top schools in Bukit Timah where their children are studying, suddenly there will be a lot of secondary market supply, he said.

With a glut of units becoming eligible for resale at more or less the same time, there is no guarantee that there will be sufficient demand to allow owners to sell when they want to at a price they deem to be acceptable, he added.

ECs are hybrid homes built and sold by private developers but subject to rules of the Housing and Development Board (HDB): They can be sold on the open market to only Singaporeans and permanent residents after the owners fulfil the five-year minimum occupation period, but all restrictions are lifted from the 10th year onwards, making them fully private.

Mr Colin Tan, Head of Research and Consultancy at Suntec Real Estate, agreed that a big supply of ECs hitting the resale market could create downward pressure on prices.

“The problem happens when everyone reaches the five-year mark and wants to sell and upgrade, but how big the problem will be will depend on general price levels at that time.

“If prices of private property remain high, then ECs, new or resale, will still be seen as an affordable option and should remain popular; but if prices in the private market have come down, people might not be so interested in ECs and would go into the private market right away,” he said.

While there may be challenges in the EC market in Punggol and Sengkang in the future, the current demand is unlikely to diminish any time soon.

Three more new EC projects are expected to launch in the two areas in the second half of next year and another site in Sengkang for EC development was put up for tender by the HDB on Monday.

For now, analysts are still upbeat about the area’s EC appeal even as more supply comes on stream, saying the units will continue to provide an affordable entry into the private residential market.

“Today, the problem is that there isn’t enough affordable private housing, so demand (for ECs) is there. The only places where the HDB can push out more ECs are Punggol and Sengkang because there is available land there,” said Mr Tan.

Source : Today – 20 Nov 2013

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