Speaker 1: Now, CNA 938 rewind.
Speaker 2: And you may have read the news about a record
Speaker 2: number of executive condominiums or ECs in short, they were
Speaker 2: sold for at least $1 million in profits last year.
Speaker 2: 38 units fell into that category, and that's more than
Speaker 2: double the number of units that made such profits in 2023.
Speaker 2: Sounds promising, doesn't it? Mm. But here's a little reality check.
Speaker 2: Many have made big gains, but about 1000 of those
Speaker 2: resale ECs since the year 2000 actually ended in losses.
Speaker 2: So is buying an EC still a financially wise move?
Speaker 2: And which ones are likely to see the biggest gains.
Speaker 2: We'll break it all down for you with Professor Xin
Speaker 2: Tian Fu, Provost chair professor at the Department of Real
Speaker 2: Estate Business School at NUS. Professor Singh, good to have
Speaker 2: you back on the show. Uh, very interesting development here
Speaker 2: in Singapore for sure. Now the number of ECs sold
Speaker 2: for over a million dollars in profit, not a million
Speaker 2: dollars price tag, but a million dollars in profit.
Speaker 2: Uh, the number of EC sold for this amount of
Speaker 2: profit doubled last year, reaching 38 units. So help us
Speaker 2: put this volume into perspective. How does it actually compare
Speaker 2: to the resale profits of private condos of similar size
Speaker 2: and perhaps even similar location during the same period?
Speaker 2: Hi, morning, Andrew and I, and interesting questions because I
Speaker 2: think when we talk about profit, we are looking at
Speaker 2: actually what we call in, in, in academic it repeatsales.
Speaker 2: We want to know when this unit was sold and then,
Speaker 2: you know, uh, how long this unit have been whole
Speaker 2: have been held, uh, before they, they sell it again. So, uh,
Speaker 2: I mean, the question you mentioned, I think there are
Speaker 2: several unit at Bishan loft, I think that was sold
Speaker 2: quite well, uh, but this was.
Speaker 2: Uh, the buyer bought it 223, 24 years ago. I
Speaker 2: think they make around about, uh, selling more than millions,
Speaker 2: I think, uh, selling it about millions. But we look
Speaker 2: at the historical transactions, it's not always the case. We
Speaker 2: also have evidence that some owner who sold it in
Speaker 2: 2017 also suffered a loss of 10 $100,000.
Speaker 2: And then actually vary. I think in general the prices
Speaker 2: gone up. So, so I think this case is, uh,
Speaker 2: we talk about this game, we also have to look
Speaker 2: at the holding period as well. I think in, if
Speaker 2: you look at 202002, 2003, 2005, the public prices actually
Speaker 2: are risen quite substantially. So it's not surprising that I
Speaker 2: think the women are able to actually make the game.
Speaker 2: And I think this also have to be uh taken
Speaker 2: in proper context because you look at all these million
Speaker 2: dollars gain, they actually constitute only about slightly more than
Speaker 2: slightly about, you know, we compare with all the sale, right,
Speaker 2: all the sales that we can observe in the EC
Speaker 2: market about 140 over $1000. So this 30 30 hour
Speaker 2: uh transaction is considered a small fraction of that, about
Speaker 2: probably around 0.5%.
Speaker 2: So I think uh the buyers of DC uh is
Speaker 2: actually meant for the sandwich group and it's meant for
Speaker 2: own occupations and, and, and, and you have to be
Speaker 2: more prudent. I think it's not meant to flip because
Speaker 2: I think it's will be dangerous to, to buy this
Speaker 2: and and hoping that they'll make a million dollars. I
Speaker 2: think it's getting harder and harder because given the high
Speaker 2: price and then the current buyers know, are they, will they,
Speaker 2: will he or she be able to actually
Speaker 2: Uh, make the same profit, same amount, but same quantum
Speaker 2: at this price is harder. I think there are certain
Speaker 2: factors that will come into play. Yeah, and certainly the
Speaker 2: younger ECs certainly won't make this kind of profit anymore, right,
Speaker 2: because they were already sold at quite a high price.
Speaker 2: So only ECs of a similar age from that that
Speaker 2: was sold back in 200, the early 2000s and earlier
Speaker 2: would make this kind of profit, if at all, right?
Speaker 2: Yeah, if you look at the current one, I think
Speaker 2: if you look at the latest launch when it's about
Speaker 2: $2 million in order to make this million dollars, I
Speaker 2: mean this owner had to sell it about 3 to
Speaker 2: $4 million. Will the market rise at uh to that
Speaker 2: level in 2030 years time? It's hard to predict, but
Speaker 2: I think this market is quicker, right? And in order
Speaker 2: to make the same amount gain, that means they have
Speaker 2: to sell it about $4 million.
Speaker 2: Uh, will the market be able to reach that threshold?
Speaker 2: That means, uh, it's not just the market prices I
Speaker 2: think the economy has, has grown significantly because the buyer's
Speaker 2: income has to catch up in order to pay 3
Speaker 2: to $4 million for EC by then because then the
Speaker 2: income ceiling no longer pay $60,000 because it's, it's not.
Speaker 2: Practical is also not uh aligning of fundamental if that
Speaker 2: price rise to that level and the income doesn't grow
Speaker 2: as quickly.
Speaker 2: And all this had to be uh uh aligned in
Speaker 2: terms of uh economy fundamentals and price so that uh the,
Speaker 2: the price rise actually comparable to the income growth as well. Otherwise,
Speaker 2: it's going to be very what we call the misalignment
Speaker 2: or out of thing in the market. This can be
Speaker 2: pro pro uh probability of overheating the market.
Speaker 2: So what's the appeal then, uh, Professor of buying a
Speaker 2: resale EC? I mean, for a brand new EC it's understandable, right,
Speaker 2: because there's a subsidies income ceiling, but what about resale
Speaker 2: EC then? I mean, uh, resale EC one advantage is
Speaker 2: that you get a computer unit, you're able to move
Speaker 2: in immediately, and also you are not subject to these
Speaker 2: 5 years and 10 years of restriction.
Speaker 2: Because it's uh the, the for EC there this resale restriction,
Speaker 2: you have to uh you have to fulfill this buyer
Speaker 2: minimum occupation, then you can sell it to Singaporean or
Speaker 2: Singapore PR buyers after 10 years, then you'd be fully, uh,
Speaker 2: I mean converted to a fee just like private you
Speaker 2: know so you can sell it to any buyers. So
Speaker 2: you probably can reach out to larger pool of buyers.
Speaker 2: I think, uh, those who buy in the resale market, they, they,
Speaker 2: they will not be subject to this. They can actually
Speaker 2: sell it, uh, when they, as and when they want,
Speaker 2: they do have to fulfill this by ation period uh
Speaker 2: kind of restriction. But again, I think they have to
Speaker 2: pay a higher price. They may not enjoy this, uh, the,
Speaker 2: the housing grants from the governments and first timer, I
Speaker 2: think you buy from, from the property developer as a
Speaker 2: first timer, you enjoy the.
Speaker 2: The grants about $50,000. Of course, when they, they sell it,
Speaker 2: they have to pay back the levy about $55,000. Uh, that, that,
Speaker 2: there's a difference.
Speaker 2: Uh, professor, uh, what must buyers be prepared for when
Speaker 2: taking over a 5 year old EC unit that's yet
Speaker 2: to be privatized?
Speaker 2: So I think uh the buyers, as you said that they,
Speaker 2: they had to be, I mean to fulfill the eligibility criteria.
Speaker 2: They have to be Singaporean citizen or Singapore PR so
Speaker 2: foreign buyer are not still not allowed to buy, uh,
Speaker 2: the research easyC uh within after 5 years, but within
Speaker 2: less than 10 years now. So, so when they buy
Speaker 2: over this they actually.
Speaker 2: Uh, the, the, the second buyer also, uh, think about
Speaker 2: the pricing cons consideration because whether you're going to.
Speaker 2: Uh, pay, uh, reasonable price, whether the price is too
Speaker 2: expensive because I think certain EC are quite popular because
Speaker 2: I think when it's when they purchase from the private developer,
Speaker 2: the pricing was actually priced according to the affordability ratio
Speaker 2: because there's an income ceiling, right? So, so they have
Speaker 2: to price to, to the, to such that they will
Speaker 2: not be exceeding the income ceiling because this buyer who
Speaker 2: buy TCC will have to.
Speaker 2: Uh, consider their total debt service ratio, to make sure
Speaker 2: that the mortgage, uh, availability as well. So all these
Speaker 2: have been taken into consideration because there are cases in
Speaker 2: the older version, uh, the other, the other model we
Speaker 2: call DBSS some years ago, not sure whether you remember
Speaker 2: this because government suspended as DBSS.
Speaker 2: Developer buildings penthouse or DBSS which is not, not in
Speaker 2: line with the public housing objective. So I think again
Speaker 2: you see the same thing because it plan for uh
Speaker 2: sandwich family who cannot afford a private private condo because
Speaker 2: of high price and at the same time they are
Speaker 2: not easy.
Speaker 2: For HDB BTO, uh, I mean, this EC offer them
Speaker 2: an alternative option, so they have certain restrictions imposed unlike the,
Speaker 2: the private condo or apartments. Professor, I'm just curious, is
Speaker 2: there a way to tell if an EC.
Speaker 2: would be profitable compared to other ECs. I mean, there
Speaker 2: are a lot of ECs that coming up, right, uh,
Speaker 2: in the east area. So, so ECs, uh, of course,
Speaker 2: the popular ones will be in the central area like
Speaker 2: the one in Bishan, but increasingly we are seeing more
Speaker 2: ECs popping up, uh, in Tampines, and I suppose what
Speaker 2: is called the city fringe or even the suburban parts
Speaker 2: of Singapore. Is there a way, in a way to
Speaker 2: tell if, you know, OK, I'm going to invest in
Speaker 2: this EC hoping to get a profit of sorts.
Speaker 2: Actually for EC, uh, typically if you look at the
Speaker 2: EC land sale, they are usually locate the land is
Speaker 2: located near the housing estate because I think these are
Speaker 2: the land land usually a tender of the government in
Speaker 2: the past by HDB now sometime by URA uh meant to.
Speaker 2: Uh, for those actually, uh, upgraded or even for the
Speaker 2: sandwich family, they want to live in the g kind
Speaker 2: of community yet because uh high price in private sector
Speaker 2: actually price them out of the place. I think increasingly
Speaker 2: we also see some of these land so nearer to
Speaker 2: the city center, but mostly I think you look at
Speaker 2: the most, most of the EC.
Speaker 2: Outside central area, uh, closer to HDBS and this EC,
Speaker 2: the difference between private, uh, EC and private canoe and
Speaker 2: apartment is that EC tend to be a lot more
Speaker 2: higher density. They are more denser and then there are
Speaker 2: a lot more units being built in the smaller parcel
Speaker 2: of land. This is actually to intensify the land.
Speaker 2: Uh, I mean, that price also usually kept by the
Speaker 2: private prices and private condo and apartment prices because it's
Speaker 2: had to have, have a price differential differentiation in order for,
Speaker 2: for this buyer to.
Speaker 2: To consider EC, otherwise it will not be uh feasible
Speaker 2: for them to consider EC if the private condo prices
Speaker 2: is actually, uh, closer, you know, is still a price
Speaker 2: gap if you compare the two.
Speaker 2: Yeah, precisely. So I'm wondering if I take a look
Speaker 2: at the price of Bishan Loft which was sold for
Speaker 2: 2.16 million, uh, and that is quite a sizable unit
Speaker 2: versus something that's uh similar in price but a bit
Speaker 2: smaller yet still in, still closer to the city. I mean,
Speaker 2: what's going to be the deciding factor here because ultimately,
Speaker 2: I also need
Speaker 2: To look at resale value, right, even though ECs are
Speaker 2: meant to be sort of aligned with public housing policies
Speaker 2: in a way, but I think it's um not not
Speaker 2: quite the elephant in the room to say that people
Speaker 2: still want to, you know, be able to make some
Speaker 2: kind of margin if they decide during their life to
Speaker 2: change the kind of residents that they want to have.
Speaker 2: Because I think uh if you look at the DC
Speaker 2: Bishan loft case, I think 2.2.3 million, I think for the,
Speaker 2: the transaction that, uh, uh, recorded gain of about 1.1 million.
Speaker 2: I think 2.4 million, uh, you look at the size,
Speaker 2: I think for the CC 1,0003 or more than 10003
Speaker 2: square feet, this is the same price probably if you
Speaker 2: buy a condo, a private condo we get half the
Speaker 2: size of this with the same price and a good location.
Speaker 2: So I think uh.
Speaker 2: For buyers, I think they have to think about, uh,
Speaker 2: when they actually purchase some of these, uh, see whether
Speaker 2: it's the sale or new sales, I think they probably
Speaker 2: have to think about, uh, uh, uh, for the owner occupation,
Speaker 2: long-term occupation, whether location, whether the, the amenity, uh, it's
Speaker 2: actually is suitable for the family and for the, the living, uh,
Speaker 2: needs because I think when the
Speaker 2: The family growth and have more children that this is
Speaker 2: important thing. Some of them are also looking at closer
Speaker 2: to the parents, closer to school amenity, and so on.
Speaker 2: I think it's difficult, I think, to time the market
Speaker 2: because if you really want to speculate or flip in
Speaker 2: order to make the gain, I think the market actually
Speaker 2: go up and down because I think even though some
Speaker 2: may say that oh I can time the market to
Speaker 2: make a game, but I think the market is efficient,
Speaker 2: then if you can time the market.
Speaker 2: Those buyers buy subsequently, are they, I know this is
Speaker 2: a something you call in the stock market they call
Speaker 2: greatest food kind of uh uh games and whoever the
Speaker 2: last buyer, the music stopped, they will actually get burned.
Speaker 2: I think, I think it still need to be very
Speaker 2: prudent because I think the market go up and down.
Speaker 2: I think you, it's difficult to time the market and,
Speaker 2: and make probably because super normal profit, but I think
Speaker 2: important I think buying the EC or buy a house,
Speaker 2: I think.
Speaker 2: The primary consideration whether this meet my or suit my
Speaker 2: living or my family space requirements. I think that should
Speaker 2: be the priority. Yeah, uh, wise words indeed, just to
Speaker 2: give our listeners some context, the Bishan loft is roughly 1300,
Speaker 2: 1200 square foot unit for 2.16 million versus a 753
Speaker 2: square foot unit in Evelyn Road sold for around the
Speaker 2: same price. So.
Speaker 2: Uh, the decision making process, um, it really depends on
Speaker 2: what your priorities are, as Professor Singh explained. Uh, once again,
Speaker 2: thank you for so so much for the clarity that
Speaker 2: you've brought us this morning, uh, Dr. Singh, Professor Singh, uh,
Speaker 2: do take care and uh he's hoping that the prices
Speaker 2: uh reach some kind of ceiling, uh, I suppose, to
Speaker 2: make sure that, you know, things are aligned with the
Speaker 2: public policy that we have here in Singapore. Thanks very much.
Speaker 2: Uh, that's Professor Sing Tian Fu. He's Provost Chair Professor
Speaker 2: at the Department of Real Estate at NUS Business School.