HDB Upgrader: Should I buy Executive Condominium or Private condominium?
Updated: May 19, 2020
Most Singaporean would start their 1st home at HDB as Government has provided significant huge grants to couple or highly subsidized Built to order (BTO) flat.
Nonetheless, many would upgrade from their 1st HDB after their Minimum Occupation period (MOP) is met. The most popular choice of upgrade is usually Executive Condominium or Private condominium.
As such, in this article, we will explore which option is the best.
Definition of Executive Condominium and Private Condominium
Private Condominium are built and sold by private developer.
The purchaser who is also know as the subsidiary proprietor shall hold the strata certificate of tile for individual unit.
Each registered owner shall also contribute maintenance fee based on the amount of share allocated to maintain the common property such as security guard, swimming pool, carpark, tennis court, gymnasium and more that you can name it.
Executive Condominium (EC) is a crossbreed between Public housing (HDB) and Private condominium.
EC are built and sold by private developer but the prices sold to buyers are competitively lower than private condominiums as the land sold by the Government to private developer are heavily subsidized.
EC has all the amenities like the private condominium but it is subjected to the rules and regulation mandated by Government.
What are the 10 Difference?
From the external of the building, it is hard to tell the difference between EC and Private Condominium.
1) Purchaser Restriction
Unlike Private Condominium that has no restriction in the purchase, not all individuals are allowed to purchase EC.
The following are the strict eligibility criteria that you need to fulfill before you can get approval from HDB to purchase
You need to be a Singapore Citizen
All Singapore Citizens are only eligible to apply for up to 2 new flats from the government. Therefore, you must not have used up your 2 priorities chances in order to be qualified in the purchase.
Your household income should not exceeding $16,000
You do not own other property overseas or locally or have not disposed off any within the last 30 months
For more information, you may click here
2) Minimum Occupation Period (MOP)
Private condominium has no minimum occupation period that restricts the rental of the entire unit, sales of the property or acquires another private property.
However, Executive Condominium has a Minimum Occupation Period (MOP) of 5 years.
3) Restriction on Ownership during Sale
Private Condominium has no restriction to sell the unit in the open market to any nationalities.
Executive Condominium on the other hand, is only allowed to sell the unit to either Singapore Citizen or Permanent Residents after 5 years MOP is completed. Executive Condominium owners are only allowed to sell to foreigner after the 10th years.
4) Status of Ownership
The reason there is a restriction on the above ownership during the sale is because Executive Condominium will only privatized after 10 years whereas, private condominium is privatized from the beginning.
5) Tenure of the Development
All Executive Condominium are 99 years leasehold while private condominium has more option on the tenure option such as 99 years leasehold, 999 years leasehold or freehold.
6) CPF housing Grants and resale levy
Individual buying Private condominium has no housing grant from the government to fund the property purchase
On the flip side, if you are a first timer purchaser of Executive Condominium, you can be benefited from having up to $30,000 subjected to the income of the household to finance the purchase of the property.
However, It is important to note that Resale Levy is payable if you are buying EC as your 2nd subsidized property. Resale levy can be deducted from the sale proceed upon the sale of the first flat. But any shortfall will need to be paid in cash. Therefore, it is important to factor in the resale levy into your financial calculation.
For more information, you may click here
7) Payment Scheme
Private condominium only has the option of normal progressive payment scheme which enables you to pay for the property according to the stages of the construction.
On top of the option of normal progressive payment scheme, Executive Condominium has additional option of Deferred Payment Scheme. that allows purchaser to start repaying the home loan upon collection of keys.
8) Requirement to sell before buying
Despite all the differences, most of my friends and clients decide which to buy based on whether they have a shelter during the purchase of buying.
For first timer who is going to own their property for the first time, they can still choose the based on their preference.
However, many HDB upgraders may opt for the most seamless route to own an EC. This is because It allows buyer to continue staying in their current HDB till they collect the keys for their EC before selling their HDB. There is only a requirement to pay resale levy but no need to pay ABSD. HDB upgrader is still able to secure a loan up to 75% at the point of booking.
HDB upgraders who aspire to own a private property would need to think of the following option:
To sell the existing HDB and to finance the new launch private condominium. This option ensures the purchase has no need to pay ABSD and likewise, HDB upgrader is still able to secure a loan up to 75% at the point of booking. However, HDB upgrader will need to source for a temporary rental flat during construction stage of the new launch private condominium
To keep the existing HDB and go ahead to purchase the new launch private condominium. This options required purchaser to pay ABSD upfront and get a remission of the ABSD if the purchaser is able to sell off the HDB with in 6months of the collection of the keys of their new launch. Since it is considered as application to buy second properties, the loan eligibility is up to 45% at the point of booking only.
9) Capital Appreciation
Based on research, generally the price EC has increased from average $643psf to $830psf which is a growth of 2.91% per year or a growth rate of 29.1% for 10 years
Assuming 1000sf unit, profit over 10 years will be $187K.
For private condominium, it has been noticeable that prices has increase from $1154psf to $1556psf showing a growth rate of 3.48% per year or 34.8% over 10 years.
Assuming 1000sf unit, profit over 10 years, $402K.
Based on the research, the investment return on Private Condominium is higher than Executive Condominium.
10 ) Mortgage Service Ratio (MSR)
Private property will be subjected to only Total Debts Servicing Ratio (TDSR).
TDSR refers to the percentage of borrower’s monthly gross income that is used to service borrower’s all monthly debts liability.
Monetary Authority of Singapore (MAS) implemented TDSR to ensure borrowers are not over over-stretching themselves by borrowing too much to finance their property.
The highest allowable TDSR is 60%.
For more information on TDSR:
On top of TDSR, purchaser who decide to buy EC will be further subjected to Mortgage Service Ratio (MSR).
MSR is another stringent system that applies only to housing loans for purchase of HDB flats or executive condominium (EC) bought directly from developer.
MSR refers to the percentage of borrower’s monthly gross income that is used to service borrower’s all property loans as well as the loan being applied for.
Currently, the maximum MSR is capped at 30% of borrower’s gross monthly income.
This means that, the total amount loan eligible for borrower with the same income will be much lesser if he decide to buy EC instead of Private condominium
For more information on MSR:
There is no one size fits all. Furthermore, it is likely every financial situation is different from each individual.
Hope the following table give you a summarize of the difference.
Do you need more clarification?
If you are not clear about your current situation or what are your options available or you need more information before taking action, feel free to contact me.
I do provide a Free consultation for couples who wishes to make changes to their property portfolio but not sure how to go about it
Click Whatapp to get in contact with me for a 1 time free 30min Property Wealth Planning (PWP) consultation.
A PWP consultation includes the following:
· A detailed financial affordability assessment
· A clear and customised investment road map for your real estate investment journey.
Maine Soh holds a Bachelor’s Degree in Real Estate from NUS and has more than 10 years’ experience working as Real Estate consultant. While focusing on sales, she has attained consistent Top Achiever awards.
She has been known for being well versed with all the marketing strategy and tools.
She will constantly make diligent effort to be updated with all the new trend and digital marketing platform to enhance the sales.
She has assisted many of her clients throughout the whole process successfully by making informed decision and prevented them from making avoidable mistake.