ST : ECs may bebetter investments than private housing

Oct 17, 2010

property

ECs may bebetter investments than private housing

Prices of some ECs have gone up more than mass market private condos in same area since launch

By Esther Teo

Are executive condominiums better investments than private housing? They may well be, if price gains are anything to go by.

Some executive condominiums (ECs) - the poshest type of public housing - have gone up more in price over the years than private mass market condominiums in the same areas, a check by The Sunday Times has found.

ECs such as Bishan Loft, Woodsvale in Woodlands and The Eden in Tampines have beaten the big boys by chalking up higher price gains compared to nearby mass market condos launched during the same periods.

Pinevale, for example, an EC in Tampines launched in 1997 at $450 per sq ft (psf), has seen an average selling price of $569 psf for its 13 transactions this year - an increase of 26 per cent.

Nearby, however, Hong Leong's 537-unit The Tropica - also launched in 1997 - has sold at an average of $663 psf this year, an 11 per cent increase from its launch price of $600 psf.

ECs were first introduced for homeowners with rising housing aspirations and whose household income is above $8,000 but below $10,000.

They are more popular when the gap between public and private housing widens and lose popularity when mass market condos become more affordable.

The last EC launch was La Casa in Woodlands in 2005 before Esparina Residences near Buangkok MRT station was launched this month.

ECs, like other Housing Board (HDB) flats, are subject to a minimum occupation period (MOP) of five years. After that, they can be sold only to Singaporeans and permanent residents. They become private property after 10 years, and can then be sold to foreigners.

They are usually priced up to 25 per cent lower to compensate for these sales restrictions and thus start off from a lower base, experts say.

They note, however, that since EC owners need to meet a MOP of five years, they might not be able to profit even if residential capital values are on the uptrend.

Mr Png Poh Soon, Knight Frank senior manager of consultancy and research, said that an analysis of the ECs that have met their MOP has shown a 66.9 per cent price appreciation from 2004 to this year.

This is higher than the 51.8 per cent price increase in mass market residential homes based off the change in the Urban Redevelopment Authority price index of non-landed properties outside the central region, he said.

'Interestingly, the price gap of ECs narrowed significantly with nearby properties after the fifth-year mark,' he added, with location playing a significant part in the rate of price appreciation.

However, some experts say that buying an EC requires some good luck and timing if an owner is looking for an investment as well.

Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said that ECs which serve the so-called sandwich class thrive only during periods of high property prices.

'The quality of ECs is still generally inferior to that of private property. When private property prices decline, the difference in quality will show and ECs will become less popular...So if you need to invest in ECs, you need to time your entry and exit,' he added.

DMG and Partners analyst Brandon Lee added that historically, EC prices have shot up only when mass market prices increased since demand for mass market condos would filter into ECs that have fulfilled their MOPs.

Buyers however are still biting, with recent launches of ECs - the first in five years - such as Esparina Residences, and The Canopy in Yishun Avenue 11, receiving keen interest.

But Knight Frank's Mr Png added that as the Government launches more EC sites, not all will be equally attractive.

Interested buyers should assess the location of the development, as well as how much lower the price of the EC units will be compared with surrounding private properties, before making a purchase.

esthert@sph.com.sg


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Timing crucial for investors

'The quality of ECs is still generally inferior to that of private property...So if you need to invest in ECs, you need to time your entry and exit.'

MR COLIN TAN, head of research and consultancy at Chesterton Suntec International. The Bishan Loft EC has chalked up higher price gains than nearby mass market condos.