Exec condo market facing potential headwinds

The executive condominium (EC) market is facing a potential supply glut as the government rolls out a record number of EC sites.

A total of 25 EC sites (from both Confirmed and Reserve list) were released to the market via the Government Land Sales (GLS) programme between H1 2010 and H2 2012.

This year, 11 sites were put on the Confirmed List (one site was moved from the Reserve List in H1 2012 to the Confirmed List in H2 2012). The site at Upper Serangoon View/Upper Serangoon Road (developed into Heron Bay) has since been launched for sale.

Of the remaining 10 EC sites, five have been sold and are awaiting developer's sales launch. The remaining five have not been launched yet for sale under the GLS programme, or are waiting for the tender period to close.

Some 5,600 units from these 10 sites are expected to come on stream by end-2013, which translates to an average annual supply of 4,500 units.

By comparison, the average annual supply over the last two years has been about 3,600 units, with average take-up of 3,300 units.

There is also the record allocation of some 27,000 Built-to-Order (BTO) flats to contend with.

That BTO flats are significantly cheaper than EC units - even though both are subject to the same Housing Board rules - may push potential buyers towards BTO flats.

Potential buyers have to fulfil certain criteria, too. For instance, their combined household income must fall below $12,000 and they must be a married Singaporean couple.

The fact that dual ownership of a HDB unit and EC is not allowed also limits the pool of buyers.

Despite these factors, demand for ECs may remain strong based on historical performance.

Eugene Lim, key executive officer at ERA Realty Network, does not expect demand for ECs to fall. Interest in EC sites has been keen following the raising of the income ceiling to $12,000 in August last year, he said.

"EC demand will continue to remain healthy especially after the government increased the allocation limits for second-timer buyers from 5 per cent to 30 per cent of units in the first month of an EC project's launch," said Mr Lim.

Heron Bay offered novel features such as a jacuzzi-cum-pool of up to six metres for some ground floor units. The project in Upper Serangoon View was 4.2 times oversubscribed.

Other examples of projects that have sold well include Esparina Residences, Prive and Riverparc Residences.

Source: Business Times – 5 October 2012