● ECs are a private property subsidised by the government.
● In planning your upgrade from HDB to EC, it is important to take into consideration the different loan terms and regulations involved for EC transactions.
● Against a shortage of EC supply, there will be continued demand for ECs over the next few years.
How many upcoming ECs are there?
For an EC in Sumang Walk, Punggol, the highest bid was S$538 psf. Including all the building costs, the estimated break even should be between S$900 - S$1000 psf. There are also ECs in Canberra Link, Anchorvale and Tampines Avenue 10. Most of them are bidded for around S$580 - S$600 psf, with the estimated break even about S$900 psf plus. With the developers profit, the break even could be even higher at S$1100 - S$1200 psf.
Are ECs classified as private property or HDB?
ECs are a private property subsidised by the government. They are very different from DBSS and BTO schemes.
When you sell DBSS or BTO, they are still classified as HDB flats. This means you will still have to go through the HDB procedures for payment and selling process.
The selling process for ECs is different - you have to sell the ECs in the same way as private property. There is a rule where you cannot sell to foreigners for the first 10 years. ECs are usually not located in prime areas like Orchard, Toa Payoh or Bishan. They are usually located outside the core central area and even outside the RCR, such as in Sengkang and Punggol. Foreigners will rarely invest in these areas. Fortunately, sellers of ECs will always be backed by Singaporeans and PRs.
Are ECs still a good buy in 2019?
You don’t get subsidised when buying private property. But ECs are an exception - they are the only private property in Singapore which the government subsidies. However, many are considering buying EC without knowing the true facts. It is important to be prudent in financial management before going into this legal commitment.
ECs are generally bigger than HDB flats. As such, EC loans are different from those derived from private property calculations. Generally, the terms of the EC loan is somewhere between those used for HDB and those used for private property. If you use your income today to buy private property, you can borrow up to S$1 million to buy a private property. For ECs, you can borrow half that amount. Those buying ECs on the launch date usually face difficulty borrowing money. They usually take up a low loan, high down payment structure. For instance, they pay between S$300K to S$400K for down payment. Many make the mistake of thinking that they will be using the same calculation as a private property loan. It is only on new launches that the loan can be calculated using the MSR calculation.
What are the steps to getting a new EC?
Firstly, you need to do an e-application so you should find an agent (like myself) to help you with the process. Once you complete the e-application and register yourself to buy the EC, you will be assigned a ballot ticket. On the first day of the new launch, you will be waiting for your ballot ticket to get called. You will not get to visit the show flat. You will need to purchase the unit on-the-spot.
ECs are usually oversubscribed by 2 or 3 times. Moreover, only 60 - 70% is available for 2nd time buyers. Once that quota is hit, the remaining leftover is reserved for first-time buyers.
What is the 12 February 2019 rule about?
On 12 February 2019, the government revised the rule for when you can purchase ECs. Previously, you did not have to hit the Minimum Occupancy Period (MOP) for HDB before registering for ECs. After the new revised rule, you must hit the MOP of 5 years before you can register to buy EC. Those who register for new launches should already meet their MOP. Otherwise, they will not be approved.
What are the two payment schemes for ECs?
For EC purchase, there are two payment methods: Deferred payment and normal progressive payment. Normal progressive payment is the same as how you will pay for a normal condominium. For deferred payment, you have to start paying a certain percentage before they start building. Also, you will pay a higher price at around 2 - 4%. The upside of deferred payment is that you only need to pay 25% down payment, with the remaining payment deferred until you take the key.
However, I recommend you to use the normal progressive payment method if you can afford it, since the overall price is cheaper.
What are you paying for?
If you buy a new launch, you should consider carefully the renovation which is included in the selling price. This often includes air-conditioning systems and even washing machines. However, one important feature that is not included is the lighting system. This renovation perk will save you a bulk of your cost.
Because of this, you should minimise renovation once you take your key. Re-renovating will cause you to lose a lot of warranty benefits and may even result in damage that you cannot claim for.
How should I plan my upgrading from HDB to EC?
If you currently own a HDB flat, you will most likely continue to stay in your HDB flat while waiting for the keys to your EC. Buyers commonly make the mistake of benchmarking whether it is prudent to upgrade against the current selling price of the HDB.
As your HDB flat gets older, you might not command as good a selling price as you can today. According to statistics from HDB and URA, the relationship between private property and HDB flats are almost opposite. The trend is that HDB prices are going down while private property prices are going up. This gap will continue to widen in three to four years since there is unlikely to be sufficient supply of ECs to meet the demand.