WEBVTT - More EC units resold for profit of at least $1 million in 2024 – How profitable is the market?

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<v Speaker 1>Now, CNA 938 rewind.

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<v Speaker 2>And you may have read the news about a record

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<v Speaker 2>number of executive condominiums or ECs in short, they were

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<v Speaker 2>sold for at least $1 million in profits last year.

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<v Speaker 2>38 units fell into that category, and that's more than

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<v Speaker 2>double the number of units that made such profits in 2023.

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<v Speaker 2>Sounds promising, doesn't it? Mm. But here's a little reality check.

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<v Speaker 2>Many have made big gains, but about 1000 of those

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<v Speaker 2>resale ECs since the year 2000 actually ended in losses.

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<v Speaker 2>So is buying an EC still a financially wise move?

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<v Speaker 2>And which ones are likely to see the biggest gains.

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<v Speaker 2>We'll break it all down for you with Professor Xin

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<v Speaker 2>Tian Fu, Provost chair professor at the Department of Real

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<v Speaker 2>Estate Business School at NUS. Professor Singh, good to have

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<v Speaker 2>you back on the show. Uh, very interesting development here

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<v Speaker 2>in Singapore for sure. Now the number of ECs sold

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<v Speaker 2>for over a million dollars in profit, not a million

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<v Speaker 2>dollars price tag, but a million dollars in profit.

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<v Speaker 2>Uh, the number of EC sold for this amount of

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<v Speaker 2>profit doubled last year, reaching 38 units. So help us

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<v Speaker 2>put this volume into perspective. How does it actually compare

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<v Speaker 2>to the resale profits of private condos of similar size

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<v Speaker 2>and perhaps even similar location during the same period?

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<v Speaker 2>Hi, morning, Andrew and I, and interesting questions because I

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<v Speaker 2>think when we talk about profit, we are looking at

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<v Speaker 2>actually what we call in, in, in academic it repeatsales.

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<v Speaker 2>We want to know when this unit was sold and then,

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<v Speaker 2>you know, uh, how long this unit have been whole

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<v Speaker 2>have been held, uh, before they, they sell it again. So, uh,

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<v Speaker 2>I mean, the question you mentioned, I think there are

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<v Speaker 2>several unit at Bishan loft, I think that was sold

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<v Speaker 2>quite well, uh, but this was.

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<v Speaker 2>Uh, the buyer bought it 223, 24 years ago. I

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<v Speaker 2>think they make around about, uh, selling more than millions,

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<v Speaker 2>I think, uh, selling it about millions. But we look

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<v Speaker 2>at the historical transactions, it's not always the case. We

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<v Speaker 2>also have evidence that some owner who sold it in

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<v Speaker 2>2017 also suffered a loss of 10 $100,000.

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<v Speaker 2>And then actually vary. I think in general the prices

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<v Speaker 2>gone up. So, so I think this case is, uh,

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<v Speaker 2>we talk about this game, we also have to look

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<v Speaker 2>at the holding period as well. I think in, if

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<v Speaker 2>you look at 202002, 2003, 2005, the public prices actually

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<v Speaker 2>are risen quite substantially. So it's not surprising that I

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<v Speaker 2>think the women are able to actually make the game.

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<v Speaker 2>And I think this also have to be uh taken

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<v Speaker 2>in proper context because you look at all these million

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<v Speaker 2>dollars gain, they actually constitute only about slightly more than

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<v Speaker 2>slightly about, you know, we compare with all the sale, right,

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<v Speaker 2>all the sales that we can observe in the EC

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<v Speaker 2>market about 140 over $1000. So this 30 30 hour

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<v Speaker 2>uh transaction is considered a small fraction of that, about

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<v Speaker 2>probably around 0.5%.

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<v Speaker 2>So I think uh the buyers of DC uh is

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<v Speaker 2>actually meant for the sandwich group and it's meant for

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<v Speaker 2>own occupations and, and, and, and you have to be

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<v Speaker 2>more prudent. I think it's not meant to flip because

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<v Speaker 2>I think it's will be dangerous to, to buy this

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<v Speaker 2>and and hoping that they'll make a million dollars. I

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<v Speaker 2>think it's getting harder and harder because given the high

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<v Speaker 2>price and then the current buyers know, are they, will they,

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<v Speaker 2>will he or she be able to actually

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<v Speaker 2>Uh, make the same profit, same amount, but same quantum

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<v Speaker 2>at this price is harder. I think there are certain

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<v Speaker 2>factors that will come into play. Yeah, and certainly the

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<v Speaker 2>younger ECs certainly won't make this kind of profit anymore, right,

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<v Speaker 2>because they were already sold at quite a high price.

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<v Speaker 2>So only ECs of a similar age from that that

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<v Speaker 2>was sold back in 200, the early 2000s and earlier

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<v Speaker 2>would make this kind of profit, if at all, right?

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<v Speaker 2>Yeah, if you look at the current one, I think

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<v Speaker 2>if you look at the latest launch when it's about

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<v Speaker 2>$2 million in order to make this million dollars, I

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<v Speaker 2>mean this owner had to sell it about 3 to

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<v Speaker 2>$4 million. Will the market rise at uh to that

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<v Speaker 2>level in 2030 years time? It's hard to predict, but

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<v Speaker 2>I think this market is quicker, right? And in order

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<v Speaker 2>to make the same amount gain, that means they have

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<v Speaker 2>to sell it about $4 million.

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<v Speaker 2>Uh, will the market be able to reach that threshold?

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<v Speaker 2>That means, uh, it's not just the market prices I

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<v Speaker 2>think the economy has, has grown significantly because the buyer's

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<v Speaker 2>income has to catch up in order to pay 3

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<v Speaker 2>to $4 million for EC by then because then the

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<v Speaker 2>income ceiling no longer pay $60,000 because it's, it's not.

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<v Speaker 2>Practical is also not uh aligning of fundamental if that

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<v Speaker 2>price rise to that level and the income doesn't grow

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<v Speaker 2>as quickly.

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<v Speaker 2>And all this had to be uh uh aligned in

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<v Speaker 2>terms of uh economy fundamentals and price so that uh the,

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<v Speaker 2>the price rise actually comparable to the income growth as well. Otherwise,

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<v Speaker 2>it's going to be very what we call the misalignment

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<v Speaker 2>or out of thing in the market. This can be

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<v Speaker 2>pro pro uh probability of overheating the market.

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<v Speaker 2>So what's the appeal then, uh, Professor of buying a

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<v Speaker 2>resale EC? I mean, for a brand new EC it's understandable, right,

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<v Speaker 2>because there's a subsidies income ceiling, but what about resale

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<v Speaker 2>EC then? I mean, uh, resale EC one advantage is

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<v Speaker 2>that you get a computer unit, you're able to move

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<v Speaker 2>in immediately, and also you are not subject to these

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<v Speaker 2>5 years and 10 years of restriction.

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<v Speaker 2>Because it's uh the, the for EC there this resale restriction,

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<v Speaker 2>you have to uh you have to fulfill this buyer

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<v Speaker 2>minimum occupation, then you can sell it to Singaporean or

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<v Speaker 2>Singapore PR buyers after 10 years, then you'd be fully, uh,

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<v Speaker 2>I mean converted to a fee just like private you

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<v Speaker 2>know so you can sell it to any buyers. So

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<v Speaker 2>you probably can reach out to larger pool of buyers.

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<v Speaker 2>I think, uh, those who buy in the resale market, they, they,

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<v Speaker 2>they will not be subject to this. They can actually

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<v Speaker 2>sell it, uh, when they, as and when they want,

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<v Speaker 2>they do have to fulfill this by ation period uh

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<v Speaker 2>kind of restriction. But again, I think they have to

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<v Speaker 2>pay a higher price. They may not enjoy this, uh, the,

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<v Speaker 2>the housing grants from the governments and first timer, I

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<v Speaker 2>think you buy from, from the property developer as a

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<v Speaker 2>first timer, you enjoy the.

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<v Speaker 2>The grants about $50,000. Of course, when they, they sell it,

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<v Speaker 2>they have to pay back the levy about $55,000. Uh, that, that,

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<v Speaker 2>there's a difference.

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<v Speaker 2>Uh, professor, uh, what must buyers be prepared for when

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<v Speaker 2>taking over a 5 year old EC unit that's yet

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<v Speaker 2>to be privatized?

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<v Speaker 2>So I think uh the buyers, as you said that they,

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<v Speaker 2>they had to be, I mean to fulfill the eligibility criteria.

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<v Speaker 2>They have to be Singaporean citizen or Singapore PR so

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<v Speaker 2>foreign buyer are not still not allowed to buy, uh,

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<v Speaker 2>the research easyC uh within after 5 years, but within

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<v Speaker 2>less than 10 years now. So, so when they buy

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<v Speaker 2>over this they actually.

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<v Speaker 2>Uh, the, the, the second buyer also, uh, think about

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<v Speaker 2>the pricing cons consideration because whether you're going to.

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<v Speaker 2>Uh, pay, uh, reasonable price, whether the price is too

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<v Speaker 2>expensive because I think certain EC are quite popular because

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<v Speaker 2>I think when it's when they purchase from the private developer,

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<v Speaker 2>the pricing was actually priced according to the affordability ratio

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<v Speaker 2>because there's an income ceiling, right? So, so they have

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<v Speaker 2>to price to, to the, to such that they will

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<v Speaker 2>not be exceeding the income ceiling because this buyer who

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<v Speaker 2>buy TCC will have to.

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<v Speaker 2>Uh, consider their total debt service ratio, to make sure

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<v Speaker 2>that the mortgage, uh, availability as well. So all these

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<v Speaker 2>have been taken into consideration because there are cases in

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<v Speaker 2>the older version, uh, the other, the other model we

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<v Speaker 2>call DBSS some years ago, not sure whether you remember

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<v Speaker 2>this because government suspended as DBSS.

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<v Speaker 2>Developer buildings penthouse or DBSS which is not, not in

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<v Speaker 2>line with the public housing objective. So I think again

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<v Speaker 2>you see the same thing because it plan for uh

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<v Speaker 2>sandwich family who cannot afford a private private condo because

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<v Speaker 2>of high price and at the same time they are

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<v Speaker 2>not easy.

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<v Speaker 2>For HDB BTO, uh, I mean, this EC offer them

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<v Speaker 2>an alternative option, so they have certain restrictions imposed unlike the,

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<v Speaker 2>the private condo or apartments. Professor, I'm just curious, is

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<v Speaker 2>there a way to tell if an EC.

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<v Speaker 2>would be profitable compared to other ECs. I mean, there

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<v Speaker 2>are a lot of ECs that coming up, right, uh,

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<v Speaker 2>in the east area. So, so ECs, uh, of course,

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<v Speaker 2>the popular ones will be in the central area like

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<v Speaker 2>the one in Bishan, but increasingly we are seeing more

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<v Speaker 2>ECs popping up, uh, in Tampines, and I suppose what

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<v Speaker 2>is called the city fringe or even the suburban parts

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<v Speaker 2>of Singapore. Is there a way, in a way to

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<v Speaker 2>tell if, you know, OK, I'm going to invest in

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<v Speaker 2>this EC hoping to get a profit of sorts.

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<v Speaker 2>Actually for EC, uh, typically if you look at the

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<v Speaker 2>EC land sale, they are usually locate the land is

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<v Speaker 2>located near the housing estate because I think these are

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<v Speaker 2>the land land usually a tender of the government in

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<v Speaker 2>the past by HDB now sometime by URA uh meant to.

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<v Speaker 2>Uh, for those actually, uh, upgraded or even for the

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<v Speaker 2>sandwich family, they want to live in the g kind

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<v Speaker 2>of community yet because uh high price in private sector

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<v Speaker 2>actually price them out of the place. I think increasingly

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<v Speaker 2>we also see some of these land so nearer to

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<v Speaker 2>the city center, but mostly I think you look at

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<v Speaker 2>the most, most of the EC.

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<v Speaker 2>Outside central area, uh, closer to HDBS and this EC,

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<v Speaker 2>the difference between private, uh, EC and private canoe and

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<v Speaker 2>apartment is that EC tend to be a lot more

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<v Speaker 2>higher density. They are more denser and then there are

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<v Speaker 2>a lot more units being built in the smaller parcel

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<v Speaker 2>of land. This is actually to intensify the land.

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<v Speaker 2>Uh, I mean, that price also usually kept by the

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<v Speaker 2>private prices and private condo and apartment prices because it's

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<v Speaker 2>had to have, have a price differential differentiation in order for,

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<v Speaker 2>for this buyer to.

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<v Speaker 2>To consider EC, otherwise it will not be uh feasible

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<v Speaker 2>for them to consider EC if the private condo prices

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<v Speaker 2>is actually, uh, closer, you know, is still a price

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<v Speaker 2>gap if you compare the two.

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<v Speaker 2>Yeah, precisely. So I'm wondering if I take a look

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<v Speaker 2>at the price of Bishan Loft which was sold for

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<v Speaker 2>2.16 million, uh, and that is quite a sizable unit

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<v Speaker 2>versus something that's uh similar in price but a bit

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<v Speaker 2>smaller yet still in, still closer to the city. I mean,

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<v Speaker 2>what's going to be the deciding factor here because ultimately,

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<v Speaker 2>I also need

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<v Speaker 2>To look at resale value, right, even though ECs are

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<v Speaker 2>meant to be sort of aligned with public housing policies

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<v Speaker 2>in a way, but I think it's um not not

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<v Speaker 2>quite the elephant in the room to say that people

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<v Speaker 2>still want to, you know, be able to make some

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<v Speaker 2>kind of margin if they decide during their life to

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<v Speaker 2>change the kind of residents that they want to have.

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<v Speaker 2>Because I think uh if you look at the DC

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<v Speaker 2>Bishan loft case, I think 2.2.3 million, I think for the,

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<v Speaker 2>the transaction that, uh, uh, recorded gain of about 1.1 million.

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<v Speaker 2>I think 2.4 million, uh, you look at the size,

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<v Speaker 2>I think for the CC 1,0003 or more than 10003

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<v Speaker 2>square feet, this is the same price probably if you

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<v Speaker 2>buy a condo, a private condo we get half the

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<v Speaker 2>size of this with the same price and a good location.

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<v Speaker 2>So I think uh.

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<v Speaker 2>For buyers, I think they have to think about, uh,

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<v Speaker 2>when they actually purchase some of these, uh, see whether

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<v Speaker 2>it's the sale or new sales, I think they probably

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<v Speaker 2>have to think about, uh, uh, uh, for the owner occupation,

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<v Speaker 2>long-term occupation, whether location, whether the, the amenity, uh, it's

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<v Speaker 2>actually is suitable for the family and for the, the living, uh,

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<v Speaker 2>needs because I think when the

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<v Speaker 2>The family growth and have more children that this is

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<v Speaker 2>important thing. Some of them are also looking at closer

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<v Speaker 2>to the parents, closer to school amenity, and so on.

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<v Speaker 2>I think it's difficult, I think, to time the market

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<v Speaker 2>because if you really want to speculate or flip in

0:12:36.869 --> 0:12:39.270
<v Speaker 2>order to make the gain, I think the market actually

0:12:39.270 --> 0:12:42.309
<v Speaker 2>go up and down because I think even though some

0:12:42.309 --> 0:12:43.869
<v Speaker 2>may say that oh I can time the market to

0:12:43.869 --> 0:12:46.319
<v Speaker 2>make a game, but I think the market is efficient,

0:12:46.330 --> 0:12:47.939
<v Speaker 2>then if you can time the market.

0:12:48.409 --> 0:12:52.849
<v Speaker 2>Those buyers buy subsequently, are they, I know this is

0:12:52.849 --> 0:12:54.890
<v Speaker 2>a something you call in the stock market they call

0:12:54.890 --> 0:12:59.049
<v Speaker 2>greatest food kind of uh uh games and whoever the

0:12:59.049 --> 0:13:01.840
<v Speaker 2>last buyer, the music stopped, they will actually get burned.

0:13:02.090 --> 0:13:04.729
<v Speaker 2>I think, I think it still need to be very

0:13:04.729 --> 0:13:06.909
<v Speaker 2>prudent because I think the market go up and down.

0:13:06.969 --> 0:13:09.770
<v Speaker 2>I think you, it's difficult to time the market and,

0:13:09.890 --> 0:13:13.489
<v Speaker 2>and make probably because super normal profit, but I think

0:13:13.489 --> 0:13:15.559
<v Speaker 2>important I think buying the EC or buy a house,

0:13:15.609 --> 0:13:16.010
<v Speaker 2>I think.

0:13:16.440 --> 0:13:20.569
<v Speaker 2>The primary consideration whether this meet my or suit my

0:13:21.140 --> 0:13:25.218
<v Speaker 2>living or my family space requirements. I think that should

0:13:25.219 --> 0:13:28.419
<v Speaker 2>be the priority. Yeah, uh, wise words indeed, just to

0:13:28.419 --> 0:13:33.340
<v Speaker 2>give our listeners some context, the Bishan loft is roughly 1300,

0:13:33.419 --> 0:13:40.218
<v Speaker 2>1200 square foot unit for 2.16 million versus a 753

0:13:40.219 --> 0:13:43.619
<v Speaker 2>square foot unit in Evelyn Road sold for around the

0:13:43.619 --> 0:13:44.340
<v Speaker 2>same price. So.

0:13:44.450 --> 0:13:48.450
<v Speaker 2>Uh, the decision making process, um, it really depends on

0:13:48.450 --> 0:13:52.218
<v Speaker 2>what your priorities are, as Professor Singh explained. Uh, once again,

0:13:52.369 --> 0:13:54.250
<v Speaker 2>thank you for so so much for the clarity that

0:13:54.250 --> 0:13:57.679
<v Speaker 2>you've brought us this morning, uh, Dr. Singh, Professor Singh, uh,

0:13:57.729 --> 0:14:02.219
<v Speaker 2>do take care and uh he's hoping that the prices

0:14:02.219 --> 0:14:04.890
<v Speaker 2>uh reach some kind of ceiling, uh, I suppose, to

0:14:04.890 --> 0:14:07.090
<v Speaker 2>make sure that, you know, things are aligned with the

0:14:07.090 --> 0:14:10.580
<v Speaker 2>public policy that we have here in Singapore. Thanks very much.

0:14:13.200 --> 0:14:16.439
<v Speaker 2>Uh, that's Professor Sing Tian Fu. He's Provost Chair Professor

0:14:16.440 --> 0:14:19.229
<v Speaker 2>at the Department of Real Estate at NUS Business School.