Demand may cool now, but facilities, location will bring back buyers
DEMAND for executive condominiums (ECs), the premium Housing Board flats, will probably be sustained after a short-term blip, say market experts.
They were commenting on the impact of new housing rules announced last week, which are set to dilute market share for ECs.
These flats come with condo-like facilities and were previously the only way the so-called sandwich class could buy new HDB flats.
Such buyers, with household incomes of between $8,000 and $10,000 a month, now have another option: HDB flats under the design, build and sell scheme (DBSS), developed by private developers and with generally better finishes than other HDB flats.
Previously, an $8,000 monthly income cap applied to DBSS flats, which meant households earning $8,000 to $10,000 could look only to ECs, the resale HDB market, or private housing.
Market experts say EC demand might take a short breather as buyers hold off purchases in anticipation of falling prices following the market cooling measures.
A typical four-room build-to-order HDB flat is $300,000, a DBSS unit is about $500,000 and an EC unit, about $700,000.
Experts say although DBSS flats cost less than ECs, the lifestyle element of the condo facilities is still a key draw. A site’s location is often a key factor too in determining its popularity.
DTZ head of South-east Asia research Chua Chor Hoon said developers might be forced to cut prices in coming months and contend with thinner profit margins, should buyers hold off on purchases.
One potential litmus test will be Esparina Residences, an EC by Frasers Centrepoint and Lum Chang Building Contractors near Buangkok MRT station, expected to be launched next month.
Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said he expects the new rules to have minimal impact on EC demand.
‘I think demand has more to do with the location of a site and the way you market the development. The impact must be looked at on a case-by-case basis and cannot be generalised,’ he said.
DMG and Partners property analyst Brandon Lee expects some people who might have bought EC units to choose DBSS homes now. But the overall impact will be minimal as EC demand from first-time buyers was still ‘quite strong’, going by the latest resale applications.
‘The last EC, Far East’s La Casa in Woodlands, was launched in 2005, which means this sandwich class has since then been tapping the HDB resale market and mass private homes where prices have been on the uptrend,’ he said.
OrangeTee head of research and consultancy Tan Kok Keong said since the minimum occupation periods for both resale flats and new flats were now similar, some potential resale flat buyers might now choose DBSS or EC homes instead, making up for any loss in demand.
Developers made aggressive bids in the government land sales programme in the first half of this year, with a Sengkang EC site fetching a record $320.58 per sq ft per plot ratio (psf ppr) in May.
However, experts say that margins might not be overly affected by the changed market conditions.
Most of the four EC bids tendered so far this year would break even at $550 to $600 psf, DMG’s Mr Lee said: ‘Based on current EC secondary prices of $650 to $700 psf, fairly healthy margins of 10 to 15 per cent can still be made. I think this will also be helped by the fact that they have all been won by contractors or joint ventures with contractors, so construction costs can be better controlled.’
ECs, like other HDB flats, are subject to a minimum occupation period 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.
Source: Straits Times, 8 Sep 2010