An EC (Executive Condo) is basically a hybrid between a HDB flat and a private condo.
While ECs are sold by private developers, buyers are subjected to HDB rules and conditions.
Now there are various viewpoints – some will say upgrading to an EC is the better choice, rather than upgrading to a private condo.
There is a belief that an EC allows for better gains, considering that ECs are usually priced lower than private condos.
I do agree to a certain extent – in any investment – ENTRY PRICE is key. And ECs have a lower entry price as compared to condos.
But before making a decision, it is important to examine all the pros and cons of ECs in relation to a private condo.
Here are the main factors you need to consider if you are considering to upgrade from a HDB flat:
If your first property you bought was a HDB flat, you will need to pay a resale levy if you decide to buy an EC.
For example, if you are a 4-room HDB owner who is looking to buy an EC, you will need to pay an additional resale levy of $40,000.
The purpose of the resale levy is to ensure the subsidy has been reduced and to ensure fair allocation of public housing subsidies between a first-timer HDB buyer and a second-timer HDB buyer.
For those who are considering to upgrade from HDB flat to ECs, this resale levy can reduce the amount of gains you might have from the appreciation of your BTO HDB flat.
Resale Levy Is Not Applicable If You Upgrade To Private Condo
Unlike buying an EC, there is no resale levy applicable if you upgrade directly to a private condo. You are essentially buying directly from the private developers.
Of course, a private condo would have slightly more premium pricing as compared to “subsidized” ECs.
If you are a HDB upgrader, you will also have to consider the required conditions imposed on ECs.
One of the more important things to consider is that of the MOP (Minimum Occupation Period) imposed for EC buyers.
- Like a HDB flat, ECs can only be sold to Singaporeans and PRs after the 5-year period is up.
- All restrictions will be lifted and even single foreigners can buy only after a 10-year period.
A Private Condo Can Be Sold Any Time After Purchase
As I shared in my previous blog post regarding selling A Treasure Trove , a private condo can be sold anytime there is a willing buyer and a willing seller. Owners can even sell before the condo is even completed!
There are also no restrictions on the buyers – resulting in a potentially larger pool of buyers. Hence this is one of the reasons why a private condo usually can appreciate faster than an EC.
However there are certain exceptions as well – it also depends on when you exit from the property.
Buying an EC is considered “taking a second bite from the HDB apple”
What this means is that, after buying a HDB and followed by an EC – you have essentially used up all your potential housing subsidies.
Now for retirees who wish to unlock their retirement funds by downgrading to a HDB, this means you have no other choice but to buy a HDB flat from the open market.
When is your retirement? 20-30 years time?
Buying from the open market for HDB is usually not a bad choice. The government’s main focus is to keep public housing affordable.
But in the open market, HDB flats in convenient locations and highly developed amenities will mean a more premium price. That’s why some flats in Bishan could easily command close to $1 million dollars.
Basically in order to really do well in your property journey in Singapore, you will need to be:
- buy low when you enter the public housing market
- sell high when you exit the public housing market
- buy low when you enter the private housing market
- sell high when you want to exit the private housing market
- buy lower when you enter the public housing market – again
And when you do enter the markets? At the “correct” age groups – when you are your starting income, peak income and reduced income (as you approach retirement).
Your Future Property Choice Is Decided By Your Past Property Choice
As a property agent, I can safely say that your future property is basically determined by your past choices in terms of property.
Buying a BTO HDB flat – opens up another chain of potential choices that can be slightly different from someone who bought a resale HDB flat.
It is basically determined based on the following key figures:
- Appreciation / Gain from the first HDB flat
- CPF Usage – based from how many years stayed in the first HDB
- CPF Accrued Interest
- Entry price when buying the first HDB flat
- Bank Loan (for those who didn’t use HDB loan)
- Age of homeowners (determines the amount and length of loan)
Essentially, if you intend to do well in the property game in Singapore – you really need to understand and know the rules well.
High Income Couples Does Not Equal To Access To Better Knowledge
I have seen many high-income couples make far less gains as compared to the average-income couples who restructured their property portfolio carefully.
While having a high income certainly is an advantage, I would argue that understanding the rules and playing it to your advantage is far more important.
Proper planning is key – and it is actually not that difficult.
My past experience has provided me a with a lot of context and insights to the impact of certain property choices. If you bought your first HDB flat in 2012 or earlier and have a combined household income of at least $6,000, I invite you to contact me for a free assessment on your future choices.
Find out if your unused funds can be used to beat inflation – especially with properties that has great potential to appreciate in the future.