Why are ECs located so far out? Here are three main reasons

Why are ECs located so far out? Here are three main reasons

You may have noticed that more often than not, Executive Condos are in somewhat "ulu" locations. Turns out, there are some very good reasons for this.

Illustration of a tree-lined road and a block of flats at the end
(Art: Chern Ling)

You may have noticed that Executive Condos (ECs) are often located in the suburbs. Out of 69 ECs launched and built so far, all but one – Bishan Loft – is located within 10km of the CBD.

There are a number of reasons why ECs are built on land plots that are more remote compared to the typical condo – and why you can bet on that to continue long time to come.

However, as we’ll see, that doesn’t necessarily make them a bad deal.

WHY ARE ECs IN FARAWAY AREAS?

There are three main reasons.

Reason 1: You’re paying a lot less for ECs.

The EC was introduced by HDB in 1997 to cater to Singaporeans, especially young graduates and professionals, who could afford more than a HDB flat but found private property to be out of their financial reach.

For ECs to cost less than condos, the land cost component can’t be too high. The government and the Housing & Development Board (HDB), which releases EC sites for tender, recognise this fact.

So, land plots designated for ECs are understandably located in areas with low land costs, far away from the city and at times a distance away from town centres (as is the case of Tampines Ave 10) and MRT stations.
Yes, regular private condos are also launched in such areas. Although ECs and condos may be similar at first glance (for example, they both have condo facilities), the materials used in a private condo are typically higher-end.

Compared to a condo at launch, an EC in a similar location costs about 10 to 20 per cent less. There’s simply no way to sell ECs at such a discount in prime areas where land cost is higher.

Note that an EC typically receives a boost in value after five years (when PRs become eligible to buy), and after 10 years (when foreigners become eligible to buy).

Typically, the resale price gap between ECs and private condos will decrease when these milestones are hit.

Reason 2: It’s assumed the EC demographic is less reliant on public transport.

The fact of the matter is that Singaporeans living in HDB flats are generally more likely to need walking-distance access to daily amenities and ready access to public transport, such as MRT stations, to get to work. They’re less likely to own a car or call a Grab every single time they want to head out.

Also, unlike condos, HDB estates don’t really have the means to organise private shuttle services to the nearest MRT. The monthly conservancy fees HDB owners pay is five to 8 times less than an EC or condo maintenance fee.
So, with Singaporeans’ interests in mind, it’s only right that HDB reserves land near existing amenities for HDB flats and locates ECs further away from main amenities (e.g. Tampines Ave 10), or in HDB towns that are not yet mature (e.g. Punggol and Sembawang).

Reason 3: Ulu land plots make more sense for ECs than BTO units.

A hilly knoll at Jurong Lake unsplash clement chai
A hilly knoll at Jurong Lake(Photo: Unsplash/Clement Chai)

Apart from the two reasons given above, we need to consider how much someone would pay for a BTO flat in a remote or inaccessible area. As we’ve pointed out, the typical HDB dweller is less likely to be able to afford private transport, and HDB estates don’t run free shuttle services to the MRT station.

With that in mind, would first-time, cash-tight BTO applicants part with good money (e.g. S$300,000 for a four-room flat) to live in, say, the fringes of Yishun?

The answer is a resounding no. BTO projects are typically oversubscribed. But in the September 2018 BTO sales launch, HDB received fewer applications than flats available for Melody Spring @ Yishun and Yishun Glen.

If these land plots had instead been released to private developers and sold as ECs, HDB would’ve earned a much greater profit AND matched the demographic profile to the location better. Win-win.

BUT FARAWAY LOCATIONS HAVEN’T DETERRED BUYERS

Block of flats, MRT, bus
(Photo: Unsplash/Paul Silvan)

When ECs first launched in Punggol, it was still considered a place where, to use a colloquial expression, birds don’t even lay eggs. Now it’s a vibrant town with every amenity available, and further developments in the pipeline such as the Punggol Digital District, the upcoming Singapore Institute of Technology (SIT) campus and the Cross Island MRT Line.

Piermont Grand, the only EC launched in 2019, more or less marked the turning point for the area. It was priced between S$890,000 and S$1.7 million, and the first EC to be launched above the S$1,000 per square foot (psf) price point. The location, Sumang Walk in Punggol, isn’t considered the most central in the town. Residents are a 9-minute walk, or two LRT stops, from Punggol MRT.

Despite that, Piermont Grand has sold more than 60 per cent of units to date, a commendable achievement in a lukewarm market. Other developers are taking that as a cue, launching the ECs Ola and Parc Canberra at around S$1,100 psf this year.

Location should be a determining factor in any property purchase, but here are some things ECs have going for them.

While ECs may not start out in a particularly built-up area, they’re still highly affordable homes, especially considering the upside from privatisation and the future development of the area.

This means an EC may not give you the same immediate convenience as, say, an older resale condo that’s already in a mature area, or a highly-priced new launch condo in a prime spot. However, the latter tend to already be purchased by developers at a premium, meaning there’s less room for appreciation.

A final consideration are the grants available to eligible buyers and the convenience when it comes to stamp duties (i.e. you don’t need to pay the Additional Buyer’s Stamp Duty when upgrading from an HDB flat to an EC, unlike a condo where upgraders have to pay first and apply for remission later).

So, no matter how far away they may be, ECs will continue to be hot property for those who can afford them.

This story first appeared on 99.co.

Source: 99.co

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