ECs may be better investments than private housing

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#1
Oct 17, 2010
property
ECs may be better 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


My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
Actually, if you read towards the end, you would see that they are saying that they really are not a good investment. Only in certain situations and at certain pricing levels are they actually a good investment.

But not matter what they say, its a very personal choice and you should have a good look at your finacne and your willingness to commit before you purchase.

I saw a condo in Thomson I think going for 1100 psf....up up and away....
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#3
They are comparing an apple with an orange.

Invest for Dividends:
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#4
Hi Musicwhiz,

seems like u r pretty interested in property markets.. thanx for the article..

just to share, i personally bought a EC in pasir ris abt 6 yrs ago.. it was less than 400psf.. also, there is a 30k grant given by the govt for first timer buyer. right now, it is transacting ard 600-700 psf. in terms of public housing, the editor is probably right that EC is a good investment but it all depends on price entry/timing.

i personally think that in a few years time, there will be a record breaking public housing when its 5 yrs MOP is up.. no prizes for guessing correctly.. the project name is called pinnacle @ Dux....

cheers,
bongster31
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#5
i went to see the EC @ buangkok MRT, going at $700 psf now.

If you brought in 1997, the psf for EC should be $400 psf whereabout, now it has already gained 40%!!

As usual, Location location location! and the watch the entry price! Big Grin
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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#6
(17-10-2010, 09:35 PM)brattzz Wrote: i went to see the EC @ buangkok MRT, going at $700 psf now.

If you brought in 1997, the psf for EC should be $400 psf whereabout, now it has already gained 40%!!

As usual, Location location location! and the watch the entry price! Big Grin

Hi,

IMHO.. if one waited for 13-14 years just to make that 40%, i think the return is below par.. of coz, we havent taken into account the effect of amortization.. etc..

cheers,
bongster31
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#7
There is really nothing to be gained.
My HDB unit has appreciated in price but there is no way in which I can extract the benefits from it except:
1) downgrade to a smaller unit aka reducing your standard of living.
2) migrating

Most people will not be able to benefit much from the appreciation of the price of their primary residences.
Of course, it is still better than in negative equity....
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#8
(18-10-2010, 06:58 AM)yeokiwi Wrote: There is really nothing to be gained.
My HDB unit has appreciated in price but there is no way in which I can extract the benefits from it except:
1) downgrade to a smaller unit aka reducing your standard of living.
2) migrating

Most people will not be able to benefit much from the appreciation of the price of their primary residences.
Of course, it is still better than in negative equity....

Hi yeokiwi,

well said.

i read an article sometime back that for price appreciation of an asset like a property, on surface, it doesnt really add value to the society.

having said that, for property investment, one need at least 2 n hopefully one will be able to multiply from there.

another angle to look at it is that a lot of more conservative investors will channel a lot of their funds into properties n hold time for many years. they will then cash them out when they r older or to fund their child's education.. downgrade to a smaller place when their kids r old n moved out.. and this form part of their retirement funds, etc. i have seen many oldies doing that. their patience has rewarded them handsomely. their returns from properties over the many decades when spore is booming has given them superior returns including the rentals collected.

another area i can think of is reverse mortgage to fund retirement which is the extreme case.

in today's context, the return will unlikely be as phenomenal as in the past.

but having said that, there is a shift in global demand n money flowing into asia n hence it will be difficult to predict wat the future lies ahead. probably another US like property bubble will push the prices to another stratospheric level before it collapse again, as always.

cheers,
bongster31
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#9
alrite, at least 2 properties har..

1 for staying in, 2nd one for rental yields... Big Grin
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
Reply
#10
bongster31 Wrote:in today's context, the return will unlikely be as phenomenal as in the past.

any reason for this statement? Smile
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