Recent EC launches 20% to 30% cheaper than new private condos

By Esther Hoon / The Edge Property | August 22, 2015 12:00 PM SGT
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Demand for executive condominiums (ECs) has softened in recent months on the back of tighter loan restrictions. In addition, second-time applicants for EC projects on land sites launched since Dec 9, 2013, are required to pay a resale levy. With the exception of Lake Life, ECs launched after 2013 have been performing below par with a take-up rate of 50% or less of the total units available. As a result, unsold inventory has risen to 2,898 units as at July 2015. The figure excludes an estimated 5,105 unlaunched EC units in the pipeline. Developers are faced with mounting pressure from stiff competition as EC inventory currently stands at a record high.
Despite bullish land tenders for EC sites in recent years, new EC projects are still considerably discounted relative to new private condos in the area. For example, prices for The Vales and Bellewaters in Sengkang averaged $780 psf, according to caveats lodged in the past six months. They are 20% cheaper than new condos such as Riverbank @ Fernvale, Riversails, RiverTrees Residences and Kingsford Waterbay. The average prices of these private condos range from $990 psf to $1,104 psf in the same period (see Table 1).
Similarly, The Brownstone EC at Sembawang is priced 20% to 30% cheaper than the new private condos in its vicinity (see Table 1). Developed by City Developments, the EC is located next to the upcoming Canberra MRT station on the North-South line. Larger units from the development saw good take-up rates and all of the penthouses are understood to be fully sold.
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Source: URA, The Edge Property

ECs are usually priced cheaper than comparable private condos to compensate for the tighter restrictions they are subjected to prior to privatisation. Unlike private condos, ECs are confined by resale restrictions imposed by HDB for the first 10 years before they become fully privatised. This includes restricting sales of ECs by developers to only Singaporean households that fulfil a list of eligibility requirements, such as household income not exceeding $12,000. Our previous study found that privatised ECs are still being traded at a discount relative to comparable condos, possibly owing to a difference in building quality. However, the price gap narrowed to 9% instead of the initial 20% approximated at launch.
Four EC projects are slated to launch in 2H2015. They are Sol Acres in Choa Chu Kang, a development by MCL Land that comprises 1,327 dwellings, The Criterion in Yishun, Signature at Yishun and Parc Life in Sembawang (see Table 2). The sales booking for Sol Acres will start on Aug 22 at an average price of $780 psf for the 707 units released in the first phase.

Source: URA, The Edge Property

Signature at Yishun, a 525-unit development by JBE holdings, is expected to open for sales booking at end-September at an indicative average price of $750 psf, while its adjacent development, The Criterion by City Developments and TID Residential, is likely to launch in 4Q2015.
In June, the government announced plans to raise the income ceiling for ECs, which could potentially boost demand for EC projects. Separately, it has slashed EC supply in the 2H2015 government land sales programme.
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This article appeared in The Edge Property Pullout of Issue 691 (August 24) of The Edge Singapore.
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