Executive Condominums, Buy A 2nd Property With Zero Cash And Weekly Sales Data From 10th May to 16th May 2021

Welcome to our weekly update, where we share with you the latest happenings in the first-hand market. As usual, the reason why we do this is simple. The better you understand demand, the greater you are in picking out properties with higher capital appreciation.

However, do take note that the weekly update is a guide for your reference only. Do not be distracted by all the condos on the list. It is far more important to understand the why before looking at all the “what”. This decision-making process will ensure that you acquire a property that fit your requirements. And never live a day regretting your selection.

Top Seller For This Week. Provence Residence. A French-Inspired Executive Condominium

1) WEST ZONE – 40 units

One North Eden – 2 units
Ki Residences – 5 units
Forett @ Bukit Timah – 3 unit
Daintree Residence – 1 unit
Midwood – 3 units
Parc Clematis – 2 units
Normanton Park – 14 units
Dairy Farm Residences – 3 unit
Clavon – 4 units
Verdale – 2 units
Mont Botanik – 1 unit

2) CENTRAL ZONE – 26 units

Peak Residence – 1 unit
One Bernam – 1 unit
Kopar at Newton – 1 unit
Avenue South Residences – 6 units
Fourth Avenue Residences – unit
Stirling Residences – 2 units
One Pearl Bank – 2 units
Uptown at Farrer – 2 units
The Woodleigh Residence – 9 units
The M – 2 units

3) NORTH ZONE – 31 units

Riverfront Residences – 3 units
Sengkang Grand Residences – 4 units
The Florence Residences – 18 units
Affinity at Serangoon – 4 units
The Gazania – 2 units

4) EAST ZONE – 35 units

Treasure @ Tampines – 13 units
Amber Park – 3 units
The Antares – 7 units
Parc Komo – 2 units
The Jovell – 4 units
Casa Al Mare – 2 units
Coastline Residences – 2 units
Nyon at Amber – 1 unit
La Mariposa – 1 unit

5) EC CLUSTER – 236 units

Provence Residence – 218 units
Parc Central Residences – 4 units
Parc Canberra – 1 unit
OLA – 9 units
Piermont Grand – 4 units

6) LUX CLUSTER – 22 units

Leedon Green – 2 units
The Reef at King’s Dock – 1 unit
Park Nova – 2 units
The Avenir – 2 units
Marina One Residence – 2 units
Irwell Hill Residences – 4 units
Riviere – 2 units
Marina Collection – 1 unit
Meyer House – 2 units
South Beach Residence – 1 unit
Nouvel 18 – 1 unit
Midtown Modern – 1 unit
Wallich Residence – 1 unit

Provence Residence, A French-Inspired Executive Condominium Takes Top Spot

In this week, the top-selling development was Provence Residence. A French-inspired executive condominium located at Canberra Crescent. Executive condominiums (EC) are an interesting form of hybrid housing in Singapore. To begin with, the application process for an EC is no different than that of any other public housing. Applicants must be Singaporeans, and there must be a family nucleus involved. The full eligibility conditions of purchasing an EC can be found on HDB’s website.

However, after fulfilling the minimum occupation period (MOP), this asset automatically changes into private property. With a MOP of five years, you are now eligible to resell your EC to another Singaporean or PR. Ten years later, foreign ownership of this EC is now possible.

Why Do ECs Exist?

If you have been monitoring the real estate market for some time, you will realise that most ECs are located outside the central region at places where major redevelopment is happening. The whole process is to incentivize the population to move to these areas. Although you may not currently enjoy the perks of a fully developed township, there are significant monetary gains to be made. I have written a full article on the economics behind the capital appreciation of an EC.

Using an EC To Purchase Your Next Property Without Any Cash

In addition to enjoying capital gains, it is also possible to use your current EC to purchase another property without coming up with a single dollar. There are few reasons why people do this. You may want to send your child to another school. You may also think that moving closer to your in-laws is a good idea after all. Or perhaps acquire another property for investment purposes. Whatever it is, it is possible to do this if your property is highly profitable. And in the case of ECs, they have a stellar profitability track record.

The Process Of Purchasing A Property With Zero Cash

To get this process started, we would initiate what we commonly called “decoupling”. Lawyers prefer the term part-share purchase/sale. The reason is due to the hefty additional buyer’s stamp duty imposed on the ownership of a 2nd residential property in Singapore. By decoupling, we would now have two individuals who can now purchase two different properties under their own name.

Of course, some couples may not be comfortable with this arrangement. Whether it is suitable for you largely depends on your objectives at the end of the day. To illustrate this, I will use Esparina Residences; an EC purchased when the property index was perceived at an all-time high back in 2011. This case study will reinforce what I always tell my clients. Timing is not the most significant factor when it comes to capital appreciation.

Forget About Timing The Market. The Focus Should Always Be The Type Of Product.

Esparina Residences. EC bought at the “Peak” of the Property Market.

This unit was bought on 5th January 2011 at an initial price of $844,000. Recently, it was sold at a market price of $1,298,000. Using an average interest rate of 1.5% (you can change this number yourself) and a 30-year loan, the balance after 10 years works to be $462,045. Do take note that this is just an estimated number. Interest costs, in the beginning, would be a lot cheaper when the building is under construction and higher at a later stage. The same thing goes for the mortgage payments, which will affect the balance as well.

Current Market Value Of Esparina Residences.

 

How I Estimated The Outstanding Loan Amount. Rounded down to $462,000 For Simplicity Sake

Purchasing Party

Purchase Price (50% of $1,298,000) = $649,000
5% Cash $32,450
20% CPF/Cash $129,800
75% Loan $486,750
(New Loan Now Becomes (50% of $462,000) + $486,750) = $717,750 (Do take note that the purchasing party must be able to fulfill TSDR for this new loan)
Stamp Duty $14,070
Legal Fees $3,000
Total Cash Required = $179,320

Selling Party

Selling Price (50% of $1,298,000) = $649,000
Outstanding Loan (50% of $462,000) = $231,000
Legal Fees = $3,000
Cash Proceeds = $415,000

Balance (Cash Proceeds – Cash Required) = $235,680

Determining Who Is Selling And Who Is Buying

In every decoupling case, there are 2 parties: a seller and a purchaser. How you determine which party is the seller or purchaser largely depends on the next property you are looking at. Both parties must fulfil their TDSR debt obligations for each of the property they own.

With this simple process, the selling party now has significant cash proceeds to purchase another property. More so if you consider the CPF contributions. Of course, you may argue that the overall debt of the entire household has increased significantly. However, the income generated from renting out one of their houses may very well cover both interest costs. Again, this arrangement is not for everyone. But it is a simple way to accumulate another property at the end of the day with minimum resources.

To determine if ECs, decoupling or any other instruments are suitable for you largely depends on your final objectives. Feel free to speak to us today where we can share more insights like these on how it is possible to live for “free” and accumulate a million dollars in your lifetime.

Article contributed by Jerry Wong.

Jerry Wong is a realtor with Propnex Realty. He loves coffee, cookies and condos and has been in real estate for ten years. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home. Or making well-informed decisions that see their assets grow. Book a video call appointment, and Jerry will share with you the following.

  1. How certain factors affect real estate prices. Why some condos can make a million dollars while others can lose that same million.
  2. Why timing is not the most important thing. Because some people can buy the same condo at the same time, but one end up making $100k to $200k while the other suffers losses of the same amount!
  3. Understanding your requirements and craft a solution for your real estate needs. Be it in asset progression, tax planning, financial calculations, rentals, sales, etc.

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