|ECs still relevant
Over in the EC market, experts have different opinions on the possible impact, now that more buyers can purchase ECs. Ismail foresees a domino effect, similar to the BTO segment, whereby households with a gross monthly income of up to $14,000 have the additional option of purchasing an EC.
This may push prices for ECs up due to the increase in eligible buyers who were previously ruled out due to their higher income levels, he noted. EC prices have crept up from an average of $750 psf at the start of 2013 to over $800 psf since Q3 last year, according to data from the Urban Redevelopment Authority (URA) (refer to Figure 1).
However, Wong does not expect developers to price them higher as there are still many unsold units left in the market. URA’s figures revealed that there were 2,391 vacant EC units in Q2 2015, which translates to a vacancy rate of 14.1 percent. This is up almost two percent from the same quarter last year (refer to Figure 2).
Meanwhile, EC sales are expected to pick up due to a number of factors, like the widening price gap between mass market homes and ECs, the availability of housing grants, and the ‘partial exemption’ from the Total Debt Servicing Ratio (TDSR) framework, noted Ismail.
On the partial exemption, he explained that an upgrader’s existing HDB monthly mortgage payment is not factored into TDSR calculations when a bank assesses the loan to grant for an EC unit bought directly from a developer. This is because of an existing rule which states that buyers are required to sell their HDB flat within six months of the EC project’s completion.
According to industry watchers, upcoming EC projects expected to benefit from this new rise in income ceiling are Parc Life, Signature @ Yishun and The Criterion, comprising a total of more than 1,600 units. Many buyers who were previously ineligible to book units at recently launched ECs, such as The Brownstone, The Vales and Sol Acres, can also do so now. The latest project to hit the market, Sol Acres by MCL Land, has already sold 249 units.
EC developers had been anticipating policy changes since March, when National Development Minister Khaw Boon Wan raised the possibility of increasing the income ceiling for ECs for the second time since 2011.
In fact, a Q2 survey conducted by the National University of Singapore (NUS) and the Real Estate Developers’ Association of Singapore (REDAS), which tracks the sentiment of developers, found that 54.8 percent of respondents felt the income ceiling of $12,000 for ECs was inadequate