BTO vs EC

By AndyUncategorized

This has to be the most asked question in the Singapore property scene. Should i get a BTO like everyone, or should i go one step up and get an Executive Condo?

Lets discover which one is better today!

EC vs BTO

This debate has been going on for years, and to cut it short, there’s probably no one-size-fits-all answer. So let’s discover which one’s right for you!

Build to Order (BTO) Flats

We know all about this, direct purchases from HDB. Our parents generation would probably have bought one before and swears by it for affordable pricing, capital appreciation and huge profits when the time comes should you want to sell and upgrade.

Executive Condominium (EC)

An EC is a full suite condominium, which generally means it has its own pool, gym, clubhouse, management committee like private condos. ECs are built, marketed, and sold by private developers, the same way like private properties.

However, an EC is considered HDB property for 10 years. As such, it is subject to the same restrictions like a minimum occupancy period of five years, and restrictions on who can buy it. From the 11th year onward, an EC is fully privatised. It can be sold like any other private property, and foreigners, companies, or others can also buy it.

ECs are available to buyers who have a maximum household income of S$14,000. By contrast, Built to Order (BTO) flats allow a maximum household income of S$12,000.

Short Summary of BTO and EC

Benefits of BTO

  • More affordable as compared to EC
  • More Grants available
  • Sometimes BTO might be launched in mature estates
  • Don’t have to be worried about the supply of HDB flats

Downsides of BTO

  • Have to satisfy the Minimum Occupancy Period (MOP) of 5 years before you can rent out the whole unit, or to sell it on the resale market.
  • Prices are somewhat stable after 5 years (not much upside)
  • No facilities
  • Have to buy own season parking
  • No guarded compound

Benefits of EC

  • Usually with full condo facilities
  • Higher upside potential during resale
  • Bigger buyer pool from the 10th year onwards when it’s privatised.
  • Usually c omes with 1 free parking lot
  • Higher security level

Downsides of EC

  • Have to satisfy the Minimum Occupancy Period (MOP) of 5 years before you can rent out the whole unit, or to sell it on the resale market.
  • Prices are definitely higher than BTO
  • Maintenance costs
  • Less Grants available
  • Locations are usually less desirable
  • Down Payment higher than BTO

This list is not exhaustive. But what we listed are the usual concerns of the SG population.

Here’s the latest November 2017 BTO prices from HDB.

 

Yes, thats the official price from HDB. BTO Prices Aren’t really that “CHEAP”

It’s true.

With prices pegged to the resale market, prices aren’t as competitive as they used to be prior to the introduction of COV. Just take a look at one of the recently launched BTOs

We’ll take for reference Geylang, Eunos Court 4 room flat type for example. Excluding grants the price starts from $522,000, well not exactly “cheap” and the median resale transacted price in the vicinity goes for only $638,000. As resale prices are still “capped at a certain level” i mean you can’t expect the upside to be at $800,000 level can you? It’s just not practical.

So my friends… Before you jump onto the BTO bandwagon, don’t do it without checking your potential upside first.

 

NARROWING PRICE GAP WITH PRIVATE CONDOS

Prices of ECs do appreciate and “catch up” with those of private condominiums after the 5-year and 10-year marks.

A recent report by OrangeTee noted that a new EC unit is typically sold at a 20 per cent discount to a new private condo, based on an analysis of a basket of comparable properties. “The large price gap at launch can be largely attributed to the sale restrictions imposed on ECs and the difference in land and construction costs,” it said. “Unlike private condos, ECs still fall under the purview of the Government and developers have to be conservative in their pricing.” And that’s a good thing right? I buy it at a discount, and over time it appreciates to near private property prices.

Let us compare Signature @ Yishun (EC) vs Skies Miltonia (Pte property), both relatively close in proximity to each other.

Assuming you buy a 1,000 sq ft 3 bedroom unit in Signature @ Yishun.

“Value” of the unit – 1,000 sq ft x $1,000 psf = $1,000,000

Actual price you pay – 1000 sq ft x $750 psf = $750,000

Your immediate paper profit?

$250,000.

That’s the potential profit you could stand to realize even if property prices remained stagnant for the next 10 years!

And by the way…

I have not even factored in the $30,000 in CPF grants that First-Time buyers are eligible for.

Summary

Both types of housing have their own pros and cons. This is by no means a BTO bashing blog. Buyers have to measure their financial health at the moment or consult with a qualified real estate professional.

HDB BTO flats are meant to be what they are, affordable accommodation for the masses. The lower price might enable you to use the surplus in your CPF OA account for other investment purposes. On the other hand, EC would likely have the edge over BTO due to its upside capital appreciation as the price gap of EC narrows to near private property levels during resale.

 

total number of new residetial units from 2016 to 2019

We’ll wrap up with this infographic by MND showing the inventory of completed units of different housing types. If you could choose, which type would you want to own? A very apt phrase to be used in this situation, 物以稀为贵, in english it means “the more scarce it its, the greater its value is“

Latest EC inventory information
(stocks are moving fast due to the limited supply available)

Questions for us? No problem, we’d try to reply as soon as we can.

 

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