Every now and then, I get Singaporeans I barely know asking me whether I grew up in private housing or an HDB flat. (By the way, it’s rude.) It’s clear that Singaporeans are still extremely status-conscious when it comes to the public-private housing divide.
Despite all that talk about the 5 Cs no longer being important, in actual fact the only C that’s died is the country club. Everything else is still very much alive in the hearts and minds of Singaporeans.
Which is probably why the Executive Condominium or EC came into being. This property type is a public-private hybrid. It enables homebuyers to take advantage of CPF Housing Grants while still enjoying condo facilities.
So should you buy an EC or just go the BTO route? Here are some things to consider.
1. Your EC will magically turn into private property after 10 years
The greatest draw of ECs is surely the fact that while they start out as HDB property, in 10 years’ time they will be officially recognised as private property.
Other than the bragging rights you’ll have for finally becoming a private homeowner, your flat could become a better investment, because you’ll no longer be bound by HDB restrictions on selling. You’ll be free to sell your flat to foreigners and PRs, and buyers will no longer be subject to HDB rules on who can buy and who can’t.
On the other hand, one disadvantage is that prospective buyers will not have access to CPF Housing Grants once your EC becomes private property, which could in turn have an impact on your sale.
Given Singapore’s demographic transformations over the past few years, it’s likely that in 10 years’ time there’ll be a higher proportion of foreigners seeking to purchase homes, which would work to the advantage of EC owners.
If you intend to rent out your property, you’re at an advantage once the EC becomes private property, because you’re no longer at risk of getting your home confiscated should you decide to, ahem, do something illegal like rent it out to tourists on Airbnb.
2. You pay less and are eligible for CPF grants
As ECs start out under the HDB umbrella, you are still eligible for CPF Housing Grants, assuming your income is low enough while still enabling you to afford the EC.
First-time applicants who are Singapore citizens and applying as a couple can get between $10,000 to $30,000 worth of CPF Housing Grants if their combined incomes are $12,000 and below.
Of course, another key draw is that ECs are usually priced significantly lower than full-fledged condos, but usually include all of the same frills including swimming pool, gym and whatnot.
3. If you’re part of the sandwiched class, you may not have many other options
The income ceiling for new HDB flats is currently $12,000, while the income ceiling for ECs is $14,000.
For people whose combined household income is $12,001 or $13,999, the only ways you can get your hands on a new home are to purchase an EC or buy a unit in a private development. The latter is obviously much more expensive, which makes ECs look attractive in comparison.
Of course, you’re still free to buy resale property on the public and private market. But 4- and 5-room HDB resale flats are often ridiculously expensive, frequently rivalling condo projects just a little further from the centre.
4. You get all the frills of a private condo
Even if your EC is still officially under the purview of HDB for the first 10 years of its life, you won’t feel like it, because ECs have all the frills of mass market condos, from totally unnecessary swimming pool waterfalls that nobody will use once age catches up with them, to blinding lights which waste electricity 24/7. But okay, it is nice to have a pool, tennis courts or a gym if these are things you actually use.
5. You won’t qualify if you’re single or can’t form the “right” kind of family unit
Sorry, if you’re not the type of Singaporean deemed worthy of purchasing public housing, you will be denied the right to purchase an EC. Singles can’t get in on ECs, at least not until 10 years later when they become private property, so that leaves only family units.
That means you have to apply with your spouse (or spouse-to-be), your parents or, if you’re widowed or divorced, your kids. Single parents who’ve never been married don’t have the right to purchase an EC.
Finally, when you’ve made up your mind, you’ll have to go through the usual balloting procedure just like all those folks trying to get a BTO.
6. You’ll have to arrange for your own bank loan
Whether it’s better to take out an HDB loan or a bank loan is debatable, especially if you actually care about how much interest you’ll be paying.
But with ECs there is no such option. The thing about bank loans is that while you might enjoy lower initial interest rates, you have to fork out more for the downpayment and/or cash/CPF portion, since you can only borrow a maximum of 80 per cent as opposed to 90 per cent for HDB loans.
Note that 80 per cent is the theoretical maximum, but if you already have other loans like car loans and whatnot, you might not even be allowed to borrow that much thanks to the Total Debt Servicing Ratio rule.
The rule dictates that you can’t be paying more than 60 per cent of your income in loan repayments each month, and that includes every single loan taken out in your name. So if you just took out a car loan, that will reduce the amount of cash you can borrow. It’s also important to note that even before you hit the 60 per cent TDSR cap, you will first have to consider the Mortgage Servicing Ratio (MSR) of 30 per cent, which is the percentage of your salary that you can use for your home loan repayment.
But of course, you’re all responsible people, right? So you’ll do the math before you ballot for that EC and know exactly what you’re getting yourself in to. But if all this is gibberish to you, you can easily get help from MoneySmart’s Mortgage Specialists, at no cost whatsoever. You’ll get advice on which loan is best suited for you and what you qualify for, so that you can make the right purchase decision.