Should you buy an EC or a Private Condominium?

Have you ever wondered what the differences are between an Executive Condominium (EC) versus a private condominium? Some people you ask may just tell you there are not many differences, except for the price.

That could not be further from the truth!

Here are 5 key differences for you to take note to help you get started–

1. ECs are generally cheaper as compared to private condominiums as they are targeted at the “sandwich” class

ECs are a form of hybrid housing in between public and private apartments. Managed and built by private developers, the cost of the land is subsidised by the authorities.

Generally, an EC will cost around 20-35% cheaper than a private condo unit of a similar size and layout. Of course, there will be other factors such as location. The closer it is to the transport facilities such as the MRT stations, the more expensive the apartment.

Also, since ECs are mainly targeted at the “sandwich” class, the total monthly household income cannot exceed $16,000. Additionally, for ECs, the owners need to ensure that they meet the Mortgage Servicing Ratio (MSR) where your monthly repayment is capped at thirty percent of your monthly salary.

In other words, if your monthly income is $10k, then your maximum repayment for your home cannot exceed $3k.

Another attractive factor about ECs is that for property buyers whose gross monthly household income hovers around $14 to $16k, the mortgage repayments for private housing might be a little too expensive for them, so ECs could be a more comfortable choice financially.

2. The Eligibility criteria for ECs are much narrower as compared to Private Condos

As ECs are considered HDB housing for the first ten years, property owners of ECs can apply for family and half-housing grants if their total monthly income meets the respective criteria.

For example, for Singapore citizen owners whose combined incomes are less than $10k, the family grant is $30k and the half-housing grant is $15k. However, there are no HDB loans available for ECs so property owners would need to apply for bank loans instead.

Other eligibility criteria for new ECs include:

1. Property buyers should not have disposed or owned any private properties within the last 30 months

2. Only available to Singaporean couples or Singapore & Permanent Resident couples

3. Total monthly household income cannot exceed $16k

4. Owners must qualify under the Joint Singles Scheme,Orphans Scheme, Fiance/Fiancee Scheme or the public scheme

5. Can only purchase HDB properties twice, inclusive of BTOs or resale flats

3. ECs have five year Minimum Occupancy Period (MOP)

For HDB properties such as an EC, there is a MOP of 5 years. This means that within this 5 years, the property owner is unable to sell it in the market or rent out the entire apartment. The property owner should also reside within the unit for this 5 years–so if you need to work overseas, note that your time away would mean an extension of the 5 year MOP.

MOP starts from the time when the apartment’s Temporary Occupancy Permit (TOP) is issued. So, if your EC takes four years to complete, you will need to wait an additional five years–in total nine years– before you can sell it to somebody else.

4. Reselling rules apply more strictly to ECs as compared to Private Condominiums

One of the reasons why an EC is considered a hybrid between private and public housing is due to the fact that after 10 years of being a HDB property, an EC can be officially resold as private property.

In comparison with Built to Order apartments (BTOs) where they are bounded by HDB restrictions on selling, EC home owners would eventually become private property owners after 10 years. For the period between the sixth to tenth years, ECs can only be sold to Singaporeans and PRs just like resale HDB houses. That also means that the resale buyers would not receive housing grants from CPF as only direct purchasers from HDB could apply for such grants.

After ten years, ECs could be resold to companies or foreigners on the open market just like private condos. Some property agents would argue that this would not make a big difference between ECs and private condominiums as foreigners need to fork out an Additional Buyer Stamp Duty (ABSD) of twenty five percent which would usually price out most foreigners. Moreover, those who can afford to pay the ABSD of 25 percent would also aim for luxury private housing anyway.

5. No need to pay ABSD for HDB upgraders for ECs

For HDB owners who are considering an upgrade, there is a need to factor in ABSD.

Let’s say you wish to upgrade to a private condo, you would usually purchase the condo first before selling the HDB flat in order to have a roof over your head. This would also mean that the private condo is your 2nd property and you would be liable to pay the ABSD upon exercising the option of your private condo purchase. For Singapore citizens, this could translate to about 12% of your condominium price in cash or CPF, which could come up to a notable sum. There is also the remote possibility that something could delay the selling of your HDB unit and disqualify you to apply for the ABSD remission within the next six months.

However, there is no need to worry about ABSD if you upgrade to an EC, even if you have not sold your HDB home before purchasing the EC. Do note that you will still need to pay the resale levy for subsidised HDB flats though.

Conclusion

Other than the obvious factor of budget, there are indeed many key differences between an EC vis-a-vis a private condominium. Generally, ECs are great for home upgraders and first-time home buyers as they are subsidised by the authorities and can be found in prime locations as well. However, if you are considering a long term property investment and prefer to enjoy a freehold status for your property, it would be ideal to go for private condominiums instead due to the fewer restrictions as shared above.