EC developers may release smaller units due to new measures: analysts

With a 30 per cent cap on how much house buyers can borrow to finance their executive condominiums (ECs), analysts expect developers to release more smaller-sized units for sale.

However, sales for EC units are expected to slow down with the measures, especially since December is traditionally a lull period for the property market.

Authorities have capped the Mortgage Servicing Ratio (MSR) for housing loans for EC units bought directly from property developers at 30 per cent of a borrower’s gross monthly income.

Housing developers said that those with a household income of S$10,000 and a loan period of 25 years can only borrow up to S$600,000.

This means it may be difficult to find buyers for large-sized units that cost S$1 million and above.

Analysts said this limits how much developers can raise their prices, and house hunters with tighter budgets may simply exit the market.

As for authorities’ decision to impose a resale levy on second-time applicants for EC units, analysts believe it may discourage them from upgrading.

Nicholas Mak, research head at SLP International, said: “The resale levy would also in a way increase the implied prices for some HDB upgraders of the EC unit.

“For example, if a HDB upgrader currently owns a 5-room HDB flat, he will have to pay a resale levy of about S$45,000, and this is equivalent to about S$35 to S$40 per square foot for his new EC unit.

“So in a way, he would have to pay an implied higher price for the EC unit. And this may actually discourage some buyers.”

Source : Channel NewsAsia – 10 Dec 2013

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