ST : Expect to pay more for exec condos

Mar 14, 2010

property

Expect to pay more for exec condos

Market watchers cite strong bids for new sites and pent-up demand

By Joyce Teo

Executive condominium (EC) prices look set to rise further with the close of two EC tenders at higher-than-expected bids in the past two weeks.

The Sengkang EC site attracted a top bid of $315 per sq ft (psf) of gross floor area, while the Yishun EC site drew a top bid of $281 psf of gross floor area.

Analysts estimated that the winning bidders will have to sell the units at Sengkang for $650 to $700 psf and those in Yishun for $600 to $650 psf.

CBRE Research said the median price of new 99-year leasehold private condo units in similar locations as ECs was just $663 psf as of last month.

However, the latest 99-year condo The Estuary in Yishun sold at some $750 to $800 psf, with more than 500 units snapped up since early this month. It is therefore reasonable to expect that new EC projects may be launched at more than $600 psf, it said.

In the resale market, EC unit prices have risen in line with the market, closing the gap between resale prices of EC and private condo units.

As of last month, resale EC unit prices have reached $557 psf, up 75 per cent from the market bottom in the third quarter of 2006.

The price gap between resale private condo units and resale EC units has narrowed to 11 per cent, from 14 per cent late last year, according to CBRE Research.

This could have a bearing on the gap between new EC units and new private condo units - the gap could become smaller than the historical one of 25 per cent to 35 per cent, said its executive director Li Hiaw Ho.

Said PropNex chief executive Mohamed Ismail: 'There will still be a gap of around 25 per cent. It is still there, but it may be slightly smaller because land cost has become more competitive.'

This price gap reflects the constraints attached to ECs such as qualifying conditions and the restriction on resale only after the minimum occupation period of five years, experts said.

ECs come with condo facilities but have initial sale restrictions similar to those for public housing. They convert to a private property only after a decade.

They were introduced in 1995 to bridge the gap between public housing and private apartments, aimed at Singaporeans who could afford more than an HDB flat but might find private property out of their reach.

Buyers of new EC units have to meet a gross monthly household income ceiling criterion of $10,000 a month, slightly above the $8,000 income ceiling for a new HDB flat.

Despite the expected higher EC prices, there is likely to be pent-up demand for the new ECs, Mr Ismail and Ngee Ann Polytechnic lecturer Nicholas Mak predicted.

Firstly, there have not been any EC launches since 2005, when La Casa in Woodlands was marketed, said Mr Mak.

Also, prices of 99-year leasehold condo units as well as HDB resale flats have gone up, he pointed out.

'Those who earn more than $8,000 do not qualify for build-to-order or design, build and sell scheme HDB flats. They would have a greater motivation to apply for ECs,' said Mr Ismail.

Besides, the higher psf price may not translate to a huge lump sum. 'Given the two recent EC bids, the developers are likely to offer more smaller units, such that they can sell them at the right prices,' he said.

'Developers these days are offering more smaller units. Buyers will have a better lifestyle but they will have to compromise on space.'

joyceteo@sph.com.sg



Visitors at the launch of The Estuary, a 99-year leasehold condo in Yishun, which has a price range of $750 to $800 psf. Property watchers expect new ECs to be priced above $600 psf. -- ST FILE PHOTO