OPINION: Why buying an executive condo is NOT a sure-win
By Elizabeth Choong
/ EdgeProp Singapore |
Price growth for Parc Centros, a leasehold condominium, is stronger than for two nearby ECs. (Picture: Albert Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - Executive condominiums (ECs) are very popular among buyers, because of the allure of upgrading to a private property (albeit 10 years after obtaining temporary occupation permit) at an affordable price. As such, newly launched ECs tend to be oversubscribed. (For more information, you may wish to read our overview of ECs.)
Some EC buyers are eligible for government grants, which makes owning a unit even more affordable. This has given rise to the assumption that EC owners will always reap a profit when they sell their unit. However, our analysis indicates otherwise.
Including the recently launched Copen Grand and Tenet, there are 75 ECs in Singapore. Of the remaining 73 Ecs, 23 developments are fully privatised, having obtained temporary occupation permit (TOP) at least 10 years ago. Thirty-three Ecs are partially privatised (between five and nine years old) and original buyers would have fulfilled their five-year minimum occupation period (MOP) requirement. Ten Ecs are still under five years old and the remaining seven Ecs are under construction.
Reason 1: It is possible to suffer losses
Thirteen of the 23 fully privatised ECs suffered losses when owners sold their unit upon fulfilling the required MOP. Average losses ranged from $30,525 (for Eastvale) to $172,829 (for Windermere). Fortunately, these ECs turned profitable at Year 10 when the developments became fully privatised. Average profits ranged from $57,615 (Chestervale) to $347,083 (Summerdale). You can learn more at our new webpage dedicated to ECs.
Among owners of the other 10 fully privatised ECs, average profits of $116,977 (for Lilydale) to $442,716 (for The Quintet) were achieved when they sold their unit upon MOP.
Notably, the 23 ECs that made losses at Year 5 obtained TOP in 1999 or 2000, while the 10 profitable ECs obtained TOP between 2003 and 2008.
Reason 2: Market timing is key to profitability
Windermere has the largest average loss among the 23 ECs that were unprofitable at Year 5. The loss could be attributed to bad market timing. The top three most unprofitable sale transactions for Windermere that took place five years after TOP in 2005 were purchased in 1997 when the project was launched.
Average price for ECs in District 23 was $428 psf in 1997, falling by 16.4% to $358 psf in 2005. Meanwhile, the average price for all ECs in Singapore was $429 psf in 1997, and declined by 15.6% to $362 psf in 2005. The weaker EC market resulted in losses for owners who bought their unit in 1997 and sold it in 2005.
Fortunately, market conditions improved in 2010 when average price for ECs in Singapore was $613 psf, up 40.9% from 2005. Likewise, average price for ECs in District 23 was $564 psf in 2010, an improvement of 36.5% from 2005. As such, transactions that took place in Windermere at Year 10 resulted in an average profit, thus proving time of sale and purchase is vital.
Reason 3: Condominiums may hold value better even in bad times
The Florida is an EC located along Hougang Avenue 7 and has an average loss of $126,053 upon MOP in 2005. Evergreen Park is a 99-year leasehold condominium located within a 500m radius of The Florida. Evergreen Park obtained TOP in 1999, a year earlier than The Florida.
In 1998, average price of The Florida was $433 psf, before declining by 21.9% to $338 psf in 2005. Thus, buyers who bought a unit when The Florida was launched and sold the unit upon MOP, would have lost an average of $95 psf.
In contrast, owners who bought and sold a unit in Evergreen Park during the same time period would have made a smaller average loss of $57 psf. Average price of Evergreen Park was $399 psf in 1998 but fell by 14.3% to $342 in 2005. This implies that condominiums may hold better values than ECs during a downturn in the property market.
Since 1998, average price for The Florida has grown 101% compared to 116% for Evergreen Park. Despite the stronger price appreciation, Evergreen Park ($861 psf) has a lower average price than The Florida ($873 psf) in 2022.
The stronger price appreciation holds true not just for The Florida and Evergreen Park, but for similar developments all over Singapore too. In 1998, islandwide average prices for ECs and leasehold condominiums were $426 psf and $492 psf respectively. In 2005, average prices declined by 15% to $362 psf for ECs, but increased by 9.6% to $544 for leasehold condominiums. Since 1998, islandwide average prices for ECs and leasehold condominiums have grown by 169% and 246% respectively.
Reason 4: Nearby condominiums may offer higher price appreciation
Ecopolitan and Parc Centros are located along Punggol Walk and obtained TOP in 2016. Twin Waterfalls is located beside Ecopolitian and obtained TOP in 2015. Ecopolitian and Twin Waterfalls are ECs while Parc Centros is a leasehold condominium.
Since its launch in 3Q2013, average price for Ecopolitan has risen 50%, significantly lower than Parc Centros (81%) but higher than Twin Waterfalls (-5%).
Summerdale is an EC located along Boon Lay Drive. Parc Vista is a leasehold condominium located within a 1km radius. Since 1998 when Summerdale was launched, average price for Summerdale has grown by 83%, lower than the increase of 108% for Parc Vista.
The current average price of Parc Vista ($909 psf) is 13.5% higher than Summerdale ($786 psf). In contrast, the average price for Parc Vista ($438 psf) was only 1.8% higher than Summerdale ($430 psf) in 1998. This is despite Parc Vista (TOP in 1998) being two years older than Summerdale (TOP in 2000).
The two examples above show that private condominiums outperform ECs in terms of price growth and appreciation. As such, buyers deciding between the two types of developments may wish to consider private condominiums instead of ECs if they are buying with an eye towards investment.
Reason 5: Condominiums may be a more affordable option
There have been examples where recently launched ECs are priced higher than surrounding properties. An example is Tenet, which previewed last week. The 618-unit EC has a mix of three to five bedrooms with an overall average price of $1,331 psf.
Tenet is located along Tampines Street 62 and has five leasehold condominiums within a 500m radius with current average prices of under $1,300 psf. Among the five neighbouring developments, D’Nest (TOP in 2017) and The Palette (TOP in 2015) are the newest and have the highest average prices of $1,216 psf and $1,209 psf respectively. Both condominiums are separated from Tenet by the Tampines Expressway.
There are also two freehold condominiums within a 1km radius of Tenet that have lower average prices. Pasir Ris Garden (TOP 1985) and Ris Grandeur (TOP 2005) are fetching $812 psf and $1,158 psf respectively.
As the four above-mentioned condominiums are completed, immediate occupation by owners is available. However, buyers of Tenet will have to wait until its estimated TOP date in 1Q2026 to move in. Additionally, owners of private condominiums may sell their unit to anyone at any time, subject to prevailing seller’s stamp duty. There are fewer restrictions imposed on condominiums, which gives owner-occupiers more flexibility to buy or sell their property to accommodate changes in their family size or lifestyle in the future.
In addition to Tenet, Hundred Palms Residences is another EC with more affordable neighbouring condominiums. There are two freehold condominiums within a 1km radius of Hundred Palms Residences, which is an EC located along Yio Chu Kang Road. Current average price for Hundred Palms Residences is $1,195 psf, which is higher than freehold The Waterline ($1,171 psf) and freehold Nouvelle Park ($1,134 psf). Hundred Palms Residences obtained TOP in 2019, while The Waterline and Nouvelle Park received TOP in 2013 and 1994 respectively. As such, it is possible to buy a freehold albeit older condominium at lower prices than a leasehold EC.
So, are ECs still a worthwhile consideration?
Buyers of ECs will do well to bear in mind that ECs were introduced to meet the upgrading aspirations of the “sandwich” class. As such, affordability is the key consideration, while price appreciation and profitability are secondary concerns. Contrary to popular belief, it is possible to make losses when selling an EC unit if the owner bought the unit at the peak of the market and sold the unit when the market is weaker.
Investors might want to steer clear of ECs because of their weaker price appreciation. ECs also do not hold value as well as private condominiums.
Families with modest budgets but still wish to upgrade to a private condominium can consider buying an EC but they should do their research carefully. There may be nearby private condominiums that offer more value for money because of a lower average price or a freehold tenure.
Check out the latest listings near Tenet, Copen Grand, Windermere, The Florida, Ecopolitan, Hundred Palms Residences, The Waterline, Nouvelle Park, The Palette, Summerdale, Parc Vista, Parc Centros, Twin Waterfalls
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