With higher incomes, buyers will likely create more demand for executive condominiums (ECs), according to a report by DTZ.
As of Q3 2012, there were 6,500 EC units for sale. This is in addition to the 3,100 units expected to be delivered under the confirmed list of the 1H2013 Government Land Sales (GLS) Programme. Demand is expected to match supply with a larger pool of buyers following the recent increased income ceiling.
Data from the Singapore Department of Statistics (DOS) shows that there are now more potential upgraders with the increase in earnings. Additionally, more working singles now have the buying power to apply for ECs.
“Historical data on EC take-up rates provides additional corroboration. ECs have enjoyed an average take-up rate of 72 percent compared to 66 percent for private condominium projects in the Outside Central Region (OCR), and were sold off more quickly from the date of first launch compared to private condominiums,” said Chua Chor Hoon, Head of Asia Pacific Research at DTZ.
Demand is also likely to rise as ECs have the tendency to narrow the price gap with private condos on the resale market.
“Our findings indicate that given similar location and quality attributes, an executive condominium on the resale market could fetch a similar price as a private condominium, and may even exceed the latter under some circumstances. Hence, all things being equal, home buyers are indifferent to buying a private condominium or an EC after the five-year minimum occupation period,” said Lee Lay Keng, Associate Director of Research at DTZ.
As a result, eligible buyers find ECs more economically practical, but the “realisation of capital gain will however depend on market conditions”.
Meanwhile, developers have submitted more aggressive bids for EC sites which could lead to higher prices for upcoming projects.
“Over the past year, the median price gap between a new EC and a condominium has closed while the median price gap between a new EC and HDB resale flat has widened. If EC prices were to continue to rise, potential EC buyers may then switch to the HDB resale market or the private housing market, depending on their budget,” said Chua.
Source : PropertyGuru – 20 Dec 2012