A non- typical Executive Condominium buyer
A few years ago, one of my friends recommended me a client, Mr Chan (not his real name), who was keen to purchase a property. He had just returned to Singapore after living overseas for many years. He was single and was ready to purchase a property in Singapore.
When we met up for our first consultation, Mr Chan expressed that he was considering options like a private condominium. He was looking for a place preferably central or in the western side of Singapore. As facilities such as swimming pool and gym are very important to him, landed properties are not being considered by Mr Chan.
Although he was quite fascinated with the concept of a strata landed house with its large living space and many facilities, he was nevertheless put off by the hefty monthly maintenance of most strata landed houses.
He also came to the conclusion that he did not need a house as big as a landed house!
As we were in the midst of the discussion, he suddenly asked me, " What do you think of an Executive Condominium? My sister asked me to consider that."
He caught me by surprise as I was not aware that he was considering EC. Then, the thought of Hundred Palms Residences came to my mind. A few months before I met Mr Chan, Hundred Palms Residences was the most oversubscribed Executive Condominium to date.
There were more than 2700 applications made for only 531 units. The whole development sold out in seven hours at an average price of $836 per square foot. The demand for the project was simply overwhelming!
Perhaps his sister was also caught up with the whole excitement and felt that EC could be a good investment!
Mr Chan next question was:
What is the difference between an Executive Condominium and a private condominium?
Executive Condominium which is commonly known as EC, is actually a type of public housing in Singapore first introduced in 1996. They are essentially like a private condominium with facilities like swimming pools, gyms, playgrounds and clubhouses etc.
EC is also built by a private developer just like a private condominium. There is security within a gated community and only residents and their visitors can enter. However the main difference is the price as EC is significantly cheaper than a private condominium.
EC is also under the umbrella of HDB and therefore buyers are subjected to very strict regulations and conditions.
In Singapore, most Executive Condominium buyers are usually couples or families who would like to upgrade from their existing HDB homes to one that is bigger with facilities. It is also popular for couples that are getting married and have their eyes set on EC as their first marital home.
Mr Chan, a single man in his forties, is definitely not your typical EC buyer!
Mr Chan then went on to explain that as a Singaporean, he has never applied for a HDB flat. He purchased a private property years ago but it was sold more than 10 years ago.
He felt that EC was priced very attractively and he could get a bigger unit with all the facilities and amenities that came with it as compared to buying a private condominium. He would probably have to settle for a much smaller unit at the same price for a private condominium.
After further discussion and establishing the fact that Mr Chan was keen to explore the possibility of owning an EC, I advised him that the first thing we need to look at was his eligibility.
This article will focus on Mr Chan's unique situation and how we went about his search for an EC.
ELIGIBILITY
EC is actually sold through HDB and because of that, the buyers are subjected to HDB's strict restrictions.
You will need to qualify for the EC under one of these eligibility schemes:
1). Public scheme
You (Singapore citizen) and at least one other citizen or PR applying as a family nucleus, eg. spouse and kids, parents and siblings, or children under your legal custody (only for widowed/divorced applicants)
Mr Chan was single, therefore he had no spouse and kids to form a family nucleus with. His mother owned a private property and his sister was married and also had a private property under her name.
His father was a Singapore PR and had no property under his name. Could he form a family nucleus with his father?
2).Fiance/fiancee scheme
Under this scheme, couples must register your marriage before taking possession of your EC if you are applying for additional or special CPF housing grants, or within 3 months of taking possession of the flat.
This scheme was not applicable to Mr Chan as he was not in any relationship at that time.
3). Orphans scheme
Orphan and siblings who are single, unmarried, divorced or widowed and have at least a parent who is deceased who was a Singapore citizen or PR.
There are also restrictions on property ownership and household income.
This scheme was not applicable to Mr Chan as both his parents were still alive.
4). Joint singles scheme
You and up to 3 other co-applicants, all of you have to be single (unmarried, divorced, or widowed), at least 35 years old, Singaporeans and applying jointly as co-applicants.
Mr Chan had a good friend whom he was considering purchasing the property with. His friend was single, 40 years old like Mr Chan and Singaporean.
When buying an EC under joint singles scheme, do note that you will not be eligible for the CPF Housing Grant.
After evaluating the four difference schemes, we narrowed it down to public scheme and joint singles scheme. Let us look at the public scheme first. Can Mr Chan buy the EC with his father as his mother owned a private property under her name and was not eligible?
The answer was NO!
You can only purchase an EC with either your father or mother if they are legally separated (either divorce or death of one partner).
However, a buyer can have both parents listed as joint applicants or essential occupiers of the flat but if his/her parent(s) own another HDB flat, they must sell their existing flat within 6 months of TOP of the EC.
If the parent(s) own a private property, they must dispose the private property and wait for a period of 30 months before they can apply for a EC jointly with the buyer.
In the case of Mr Chan, he was unable to purchase the unit with his father as his father was still married to his mother and his mother had no intention of selling her private property.
Our last hope was the joint singles scheme and Mr Chan was rather optimistic as he felt that he and his friend should be able to fulfil the criteria for applying as joint singles!
INCOME CEILING
For ECs, there is an income ceiling of $16,000 per household, no matter what scheme you’re applying under.
The next important criteria was the income ceiling. The average gross monthly income has been raised to $16000 per household for options issued on or after September 2019. When Mr Chan was considering purchasing an EC a few years ago, the income ceiling was $14000.
I proceeded by asking what Mr Chan's income was and he replied that it was $13800!
If Mr Chan were to buy under joint singles scheme, his co- applicant must not have an income that was more than $200! Fortunately, this gross monthly income did not include bonuses and income earned from ad hoc overtime work.
Otherwise, we can rule out EC for Mr Chan as his income alone would have exceeded the ceiling. However, it did include allowances received on a regular basis which luckily, Mr Chan did not receive any.
I asked Mr Chan if his friend was employed. Actually it didn't matter how much his friend earned. As long as his friend was employed, it was highly unlikely that he made $200 or less a month. Mr Chan would have to look for another alternative!
PROPERTY OWNERSHIP
You must not own any private property locally or overseas. If you do, you must dispose of it and can only apply for an EC after 30 months.
Mr Chan used to own a private property many years ago but he had already sold it more than 10 years ago so this particular criteria was fulfilled. He had also never owned a HDB flat(resale or direct from HDB) nor a DBSS or another EC.
Decision:
So after the discussion, Mr Chan actually did qualify to purchase an EC. He just needed to find someone, a friend or relative, who was a single Singaporean with no income!
Mr Chan eventually bought the property with his grandmother. She was Singaporean, single (her husband was deceased), retired and did not own any property for more than 20 years.
He bought it under Joint singles scheme.
LOCATION
"Huh, INZ residences is so far away? Are you sure you want to recommend to your client?"
This was the response I got when I told my colleagues a few days after the meeting with Mr Chan. However, I learnt that understanding the individual needs of the client in every case is the key to a successful deal.
Choa Chu Kang may be far for some people but to others, it could be their ideal location!
One man's meat is another man's poison
Most of the Executive Condos that are built and launched are located further away from the city centre. The main reason being that for ECs to be priced way lesser than condos, the land cost component cannot be too high.
Therefore land plots designated for ECs are usually located in areas where land cost are lower, further away from the city and could also be a distance away from town centres
Mr Chan understood this and even though he was looking at central properties, he realised that it was simply not feasible. However, he was also keen on properties in the west hence we began looking at the available options there.
I suggested Inz Residences as it was in Chao Chu Kang and the developer was a reputable one, Qing Jian Realty.
BANK LOAN
EC buyers are not eligible for HDB loans. They can only take up a bank loan. However, they are subjected to both MSR and TDSR.
I recommended a banker to Mr Chan and advised him to get his IPA done. Although he had sufficient cash and ample amount in his CPF account, he felt that he wanted to take advantage of the low interest rates and take up a bank loan.
By getting an IPA done, he would be able to know the maximum loan amount he can take up which would help him better plan his finances for the property purchase.
MINIMUM OCCUPANCY PERIOD (MOP)
Before we proceeded to the showflat, I highlighted to Mr Chan that he would only be able to sell or rent out the entire unit after 5 years (from top date)
CONCLUSION
Fast forward to 2020, Mr Chan has already moved into his new place. He sent me a few pictures of his new place and told me that he liked the space very much.
I am very happy to have assisted him in his search for a suitable home and to have played a part in him owning a place that he truly liked!
For those of you that are considering the option of upgrading to an EC and would like to find out more, please feel free to contact me for a non obligatory 30 min free consultation at 96658596 or schedule an appointment right away with me!
Having a keen interest and passion in real estate led Caroline to join the real estate industry. An investor herself since 2006, Caroline is constantly learning and upgrading herself through courses and seminars so that she is able to provide meaningful insights to her clients and to help them successfully manage and restructure their portfolios in the ever- changing market conditions.
Caroline strives to be honest, transparent and professional in all her real estate dealings with her clients. She understands that clients need to work with someone they trust, as they will be entrusting their valuable assets to that person. She is known to be trustworthy and reliable and will ensure that her clients’ interests are protected always.
With a strong commitment to client satisfaction and with the support of her teammates from Navis Living Group (Orange Tee and Tie) , she is confident that she will be able to share her experiences and knowledge to assist her clients in making the best decisions for their real estate needs so that they can achieve their desired real estate goals.
In her free time, Caroline enjoys all kinds of sports including running and playing golf. She also enjoys spending time and playing with her white miniature schnauzer, Evie!