The Economics Behind Price Appreciation for Executive Condominiums

Always Remember Prices Are Always a Function of Supply And Demand. Photo by Morning Brew on Unsplash

I am sure you have friends, relatives informing you that executive condominiums are no brainers. If you can afford them and meet HDB’s requirements, you should go ahead and book a unit. However, nobody seems to explain the economics behind how these ECs appreciate over time. To help you understand, I will be going through the rationale of how this capital appreciation occurs. After all, price movements are a function of supply and demand.

To understand this appreciation, I have compiled a list of all the ECs launched to date. Since the usual graph (from 99.co) I use only goes back to 15 years, I am unable to show the data in that format. Instead, I will use just the latest single transaction (of each EC) and compare it with what the owners bought from day one. However, do take note that since only one transaction is used, the percentage may not reflect the representation of the entire development.

List Of Executive Condomiums And Their Price Appreciation

Project NameLocationTOP DatePrice BoughtPrice SoldAppreciation (%)Transaction Date
Park Central ResidencesTampines Street 86TBANANANANA
Ola 70 Anchorvale Crescent2023NANAMANA
Parc Canberra1 Canberra Walk2023NANANANA
Piermont Grand22 Sumang Walk2023NANANANA
Rivercove Residences20 Anchorvale Lane2020NANANANA
Hundred Palm Residences260 Yio Chu Kang Road2020NANANANA
iNz Residence60 Choa Chu Kang Avenue 52019NANANANA
Northwave60A Palmer Road2019NANANANA
Treasure Crest50 Anchorvale Crescent2018$774,000$1,181,00065.53%July 2019
The Visionaire170 Canberra Drive2018$957,000$1,088,00013.69%Feb 2020
Sol Acres2 Choa Chu Kang Grove2018$783,000$962,00022.86%August 2019
Parc Life21 Sembawang Crescent2018NANANANA
Wandervale351 Choa Chu Kang Avenue 32018$762,000$1,035,00035.83%August 2020
The Criterion19 Yishun Street 512018$632,000$760,00020.25%June 2020
The Brownstone150 Canberra Drive2017NANANANA
Westwood Residences180 Westwood Avenue2017$796,000$920,00015.58%May 2020
Signature At Yishun21 Yishun Street 512017NANANANA
The Terrace88 Edgedale Plains2017$758,000$885,00016.75%Feb 2020
Bellewaters11 Anchorvale Crescent2017$782,000$990,00026.60%August 2020
The Vales79 Anchorvale Crescent2017$837,000$960,00014.705April 2020
Bellewoods100 Woodlands Avenue 52017$940,000$1,099,00016.91%March 2020
Lake Life2 Tao Ching Road2016NANANANA
The Amore53 Edgedale Plains2016$793,000$928,00017.02%July 2019
Sea Horizon1 Pasir Ris Rise2016$1,073,000$1,250,00016.50%May 2020
Ecopolitan136 Punggol Walk2016$942,000$1,250,00032.70%August 2020
SkyPark Residences1 Sembawang Crescent2016$1,013,000$1,190,00017.47%August 2020
Lush Acres1 Fernvale Close2016$821,000$1,100,00033.98%August 2020
Forestville48 Woodlands Drive 162016$809,000$950,00017.43%August 2020
The Topiary11 Fernvale Lane2016$970,000$1,420,00046.39%August 2020
Twin Fountains11 Woodlands Avenue 62016$803,000$918,00014.32%October 2019
Citylife@Tampines57 Tampines Central 72016$677,000$835,00023.34%August 2020
Waterbay45 Edgefield Plains2016$891,000$1,090,00022.33%March 2020
Waterwoods15 Punggol Field Walk2015$1,044,000$1,098,0005.17%August 2019
Heron Bay63 Upper Serangoon View2015$791,000$972,00022.88%August 2020
1 Canberra1 Canberra Road2015$911,000$1,180,00029.53%August 2020
Twin Waterfalls11 Woodlands Avenue 62016$803,000$918,00014.32%October 2019
The Rainforest331 Choa Chu Kang Avenue 32015$744,000$915,00022.98%August 2020
The Tampines Trilliant21 Tampines Central 72015$711,000$915,00028.69%August 2020
WaterColours25 Pasir Ris Link2014$604,000$715,00018.38%August 2020
Blossom Residences30 Segar Road2014$723,000$870,00020.33%August 2020
Arc at Tampines3 Tampines Avenue 82014$727,000$918,00026.27%August 2020
RiverParc Residence90 Punggol Drive2014$780,000$970,00024.36%August 2020
Belysa55 Pasir Ris Drive 12014$719,000$952,00032.40%August 2020
Austville Residences11 Sengkang East Avenue2014$724,000$905,00025%August 2020
The Canopy71 Yishun Avenue 112014$558,000$725,00029.93%August 2020
Esparina Residences113 Compassvale Bow2013$789,000$1,140,00044.49%August 2020
Privé37 Punggol Field2013$582,000$840,00044.33%August 2020
La Casa64 Woodlands Drive 162008$433,000$840,00094.00%August 2020
The Quintet36 Choa Chu Kang Street 642006$484,000$970,000100.41%July 2020
The Esparis7 Pasir Ris Drive 42005$514,000$1,010,00096.50%April 2020
Whitewater21 Pasir Ris Street 722005$431,000$812,00088.40%August 2020
Park GreenPark Green2004$426,000$920,000115.96%July 2020
Nuovo21 Ang Mo Kio Avenue 92004$609,000$1,430,000134.81%August 2020
Lilydale550 Yishun Avenue 62003$458,000$830,00081.22%August 2020
Bishan Loft31 Bishan Street 112003$558,000$1,480,000165.23%August 2020
The Dew30 Bukit Batok Street 212003$520,000$1,228,000136.15%July 2020
The Eden21 Tampines Street 342003$498,000$995,00099.80%August 2020
The Floravale220 Westwood Avenue2000$463,000$863,00086.39%August 2020
Woodsvale1 Woodlands Drive 722000$473,000$780,00064.90%August 2020
Northoaks20 Woodlands Crescent2000$486,000$835,00071.81%July 2020
The Florida78 Hougang Avenue 72000$605,000$978,00061.65%August 2020
The Rivervale1 Rivervale Link2000$555,000$815,00046.85%August 2020
Summerdale2 Boon Lay Drive2000$452,000$900,00099.12%August 2020
Yew Mei Green50 Choa Chu Kang North 62000$503,000$850,00068.99%August 2020
Pinevale2 Tampines Street 731999$607,000$940,00054.86%August 2020
Chestervale43 Bangkit Road1999$646,000$1,060,00064.09%August 2020
Windermere20 Choa Chu Kang Street 641999$609,000$860,00041.21%July 2020
Simei Green1 Simei Street 41999$548,000$998,00082.12%Aug 2020
Westmere71 Jurong East Street 131999$535,000$1,018,00090.28%July 2020
Eastvale31 Pasir Ris Drive 31999$528,000$860,00062.88%June 2020

Just by looking at the data, you would be able to derive a conclusion by yourself. Nonetheless, we will still go through the observations and the explanation behind these numbers.

1. ECs Are No Brainers

From the very first EC launch to date, every single one of them has appreciated. It does not matter where or when you buy the EC. Be it in a new township or a mature estate, good times or bad times; prices will only go one direction. ECs are a class of product that is remarkably like BTOs. History has proven that you can close two eyes, pick a random one, and it will appreciate at the end of the day. So, if you are eligible for an EC and a particular one matches your requirements, you should give it some serious consideration.

2. Location Matters More Than Timing When It Comes to Price Appreciation

If you have read through some of my articles in this blog, I will always tell you that timing is not the most important thing when it comes to capital appreciation. Location and unit types are far more critical. Well, the same can be said for ECs as well. Although every single one of them goes up in value, some do much better than others. The only difference? Location.

3. Some ECs are Sold During MOP

You may be a bit puzzled as to why some ECs can be sold during the minimum occupation period (MOP). Unlike private condos or apartments, ECs are a hybrid form of public/private housing that requires the initial purchaser to fulfil HDB’s public housing requirement. One of these requirements is for the purchaser to physically stay inside the unit for five years before you can sell them.

Sales of these ECs before the MOP period are subjected to HDB’s approval, and there are a variety of reasons why this happens. Most of the time, it entails divorce cases where it is no longer possible to maintain a family nucleus – which is one of the key requirements to purchase an EC in the first place.

4. ECs Sold During MOP Does Not Appreciate as Much

While ECs sold during the MOP period may fetch a profit, this appreciation is still pale in comparison to those that have obtained MOP status. The reason behind this phenomenon is a simple calculation change in affordability. And the leading economic cause why their prices will only go in one direction.

Affordability Calculation Change

Whenever you apply for an EC (or purchase those still under the MOP period), the affordability calculator used is based on HDB’s Mortgage Servicing Ratio or MSR in short. In essence, this means is that you cannot exceed 30% of your monthly income to service your mortgage loan.

Executive Condominiums Initial Affordability Calculator-The Mortgage Servicing Ratio

Let us take an example of a young couple who has a combined monthly income of $14,000. Because this couple is young, the bank can give them a mortgage loan tenure for 30 years. Using the MSR calculation, a maximum amount of only $14,000 x 0.3=$4,200 per month can be used to pay for the house. In addition to the MSR, this young couple must also fulfil the Total Debt Servicing Ratio (TDSR) requirements of having an interest rate of at least 3.5% or the prevailing market rate, whichever is higher. After keying all these details into a mortgage calculator, they are now able to take a maximum loan of $935,318.94 with a property price of $1,247,091.92.

MSR Calculator. Input Monthly Debt Obligation, Loan Tenure, Interest Rate To Derive Loan Amount

Executive Condominiums Affordability After MOP- The Total Debt Servicing Ratio

However, after the EC has obtained MOP status, this affordability calculation will change from MSR to TDSR. For TDSR, instead of allocating a percentage of your income to the mortgage loan, the calculation takes an overall approach to the total amount of debt you have. In other words, you have more freedom to decide where your monthly debt obligations go. Some people prefer not to drive and allocate more funds to their housing. I will take the same young couple with an income of $14,000 and work out what they can afford in the resale EC market.

With the same income of $14,000, this young couple can now allocate a maximum of 60% debt obligation towards housing. The amount works out to be $14,000 x 0.6=$8,400. Using the same calculator, they are now able to take a maximum loan amount of $1,870,637.87 with a property value of $2,494,183.33. Thereby effectively doubling their affordability.

TDSR Calculator. Input Monthly Debt Obligation, Loan Tenure, Interest Rate To Derive Loan Amount

The Simple Reason Why ECs Appreciate In Price

After understanding the economics behind these ECs, I believe you now know why they are such no brainers. The increase in demand after MOP will only bring prices in one direction. So, the question is this, should this young couple go ahead and book an EC? Or should they buy a private condo because they can? Well, there is no one size fit all solution, and it all boils down to your requirements. To understand further, why not book a video call appointment with us and we will help you craft a solution to meet your needs. Meanwhile, stay safe, do your research, and always look at the numbers!

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 the form of asset progression, tax planning, financial calculations, rentals, sales, etc.

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