Akan datang: Lower subsidies for ECs..?

National Development Minister Khaw Boon Wan has said the government loses "hundreds of millions" of dollars when constructing public flats.

He made the point on Thursday night at a dialogue session on housing issues.

This comes amid calls from some quarters for land costs to be taken out from the pricing of public flats to make them more affordable.

Mr Khaw also hinted at several other changes to come, such as subsidies for executive condominiums.

During the national conversation session on housing issues, many were concerned about the affordability of home prices.

Evalyn Khoo, a mother of two, said: “I'm concerned about the home asset value. I'm also concerned about how the younger generation can actually afford a house for themselves in the future."
Participant Philip Lee said: “I think in the past three years or so, there has been more anxiety in the market because even Singaporeans couldn't get properties through the Build-To-Order (scheme) and they have to resort to the resale market and I think if there is sufficient supply channeled to BTO, we may see more happy Singaporeans and possibly less demand in the resale market and hopefully the prices will be within range."

With regard to calls for price of new Build-To-Order (BTO) flats to be de-linked from land costs, Mr Khaw said it may be politically easy to say land is free because it belongs to everybody, but that is not the case.

He said the price of land is tied to acquisition costs, reclamation and the building of infrastructure around it.

Mr Khaw said: "You need to acquire a piece of land; you need to reclaim a piece of land. All those costs money to taxpayers and we are just trustees of taxpayers and those costs are to be accounted for. And even when you have got that land prepared, land is only valuable when we invest in infrastructure, roads, MRT... And all those costs billions of dollars. So to say that land cost is a pittance and therefore should be excluded from total construction costs… I myself think it is not quite an appropriate argument.”

He also revealed that the Housing and Development Board, which is the developer for public housing, is losing money for every flat it sells.

He said: “Every year, hundreds of millions of dollars of losses were incurred by the HDB and that's why MOF (Ministry of Finance) has to give the HDB an annual grant, otherwise the HDB will be in the red. It cannot be forever in the red, because there's no way it can make money. Because every unit that we sell, we lose money, HDB loses money. The accounting for the HDB is deficit accounting. So if you incur a $300-million loss, there is a grant of $300 million that covers it. That is how we operate the HDB.

“Let us not perpetuate this talk about HDB is making money out of building houses because if it was so simple, life would be straightforward, but that's not the case.”

The HDB pays market rate for its land and construction costs. When it prices flats below market rate, it incurs a housing deficit.

A recent report said the deficit is now in the region of about $1 billion a year, including other costs such as upgrading.

The National Development Ministry told Channel NewsAsia: "The cost of building HDB flats includes the cost of land, design, construction, financing and other project-related costs. It varies from project to project and year to year. Averaging over the past three years, the Home Ownership Programme costs HDB S$874 million per year."

Mr Khaw added that the government has to offer more subsidies with its ramped-up flat supply.

One area where subsidies are being reviewed is that for executive condominiums (ECs), which cater to Singaporeans who can afford more than an HDB flat, but find private property out of their reach.

The current household income ceiling for executive condominiums is $12,000.

Mr Khaw said: “There is this sense of inequity here that the lower-income group is getting lower subsidies than somebody who is earning $12,000, so something is wrong somewhere and therefore I think we cannot carry on the EC in this current mode."

Mr Khaw also said he is confident that he can bring down the price of new flats in non-mature estates to four times the annual median salary of a buyer - down 30% from the current 5.5 times. He is wary of some "transitional problems".

He said there needs to be "distinct differentiation" between the cheaper new flats and those built earlier.

Mr Khaw said both the MND and HDB will need to sort out this issue over the next few months.
He said: "I am fairly confident of being able to do it but some groups already anticipate transitional problems, which is what I got to sort out. If yesterday you bought (a flat) at five and half years' salary and tomorrow HDB announces a new pricing package, which is only (priced at) four years’ salary, you are going to cry 'blue murder' right?

“Therefore, I think we should not be prevented from offering a new pricing model but obviously there must be a distinct differentiation between the two products to explain why one is five and a half years and the one is four years."

The national conversation session is the second in a series of about 10 dialogue sessions on housing issues. Participants were first broken up in small groups of six and then came together in a larger group where the conversation continued. The aim is to gather feedback from Singaporeans to shape future housing policies.

The topic of affordability will be further discussed at a future Our Singapore Conversation discussion.
Details can be found on www.mnd.gov.sg/HomeSweetHome

Source: Channel News Asia

The wife and I were discussing the latest comment by our Minister Khaw about EC subsidies with a friend over dinner earlier: So will we now see more people at or around the $12K monthly income claiming to be "poor"..?

ECs: Cooling measures? What cooling measures?!

Some Executive Condominium (EC) developers have seen higher sales despite the government introducing a package of cooling measures on January 12.

EC projects like One Canberra and Watercolours, which were launched last year, have seen sales jumped by about five times after the measures kicked in.

In the two weekends after the new measures kicked in, One Canberra sold 30 units, up from two to three units per week before the announcement.

Over 60% have been sold after it was launched for sale in June 2012.

Mr Ken Yeo and his wife spent two months hunting for a new home and they finally bought one after the government introduced the seventh round of cooling measures last month.

The couple bought a 3-room dual-key executive condominium at One Canberra at Yishun for $813,000.

They intend to have their parent-in-laws move in with them when the new home is ready.

Mr Yeo said: "Talking about the price is one thing. It might be going up in the near future and there might be more cooling measures coming out. They were the two main concerns."

ECs hogged the headlines when a luxurious penthouse unit was sold for over $2 million last year.

It prompted the government to introduce a few measures targeting the segment to make sure that ECs do not stray from its objective of providing alternative housing for the sandwiched class.

Under the new rules, the maximum size of an EC unit must be no larger than 160 square metres. Some developers said this will encourage the industry to review how units are being laid out and improve space planning.

For instance, Global Property Strategic Alliance, which is jointly developing Watercolours EC at Pasir Ris, said it is looking at rolling out a new type of unit - a maisonette - in its next EC project.

Watercolours is developed by Huge Development, a joint venture between Ho Lee Group, UE E&C, GPS Alliance Development & Investment and EVIA Real Estate.

Jeffery Hong, chief executive officer of Global Property Strategic Alliance, said: "Typically in the 2-storey penthouses, if you look at the second floor, it is basically the master bedroom and the roof terraces. This is unlike the maisonette whereby your first level will be your living and dining area, and the second floor will be all your bedrooms instead of terraces."

Watercolours have also sold 20 units in the last two weekends. This is more than five times from before the cooling measures were implemented.

Watercolours was launched mid last year and over 70% of units here have been sold so far.

Under another new measure, developers will only be allowed to launch units for sale 15 months from the date of award of the EC sites.

Industry players said this will weed out weaker developers.

Richard Nah, senior manager at MCC Land Singapore, said: "The immediate income for new development upon launch is the five per cent booking fee. And when they exercise the sales and purchase agreement, it will be another 15%. This is about 20% of the sales price.

"This will go a long way into mitigating some of the cost (construction, marketing, building and running of the showflat) that the developer will have to shoulder. If the developer were to lose this avenue where they can get the funds from, they would either need to have strong financial backing or finance this through the banks. This will further add to the cost of the development."

Analysts expect seven new EC projects to be launched for sale this year from sites awarded in 2012.

Assuming all the projects are fully sold, analysts said there won't be any new EC units in the market in the first half of next year as a result of the 15-month restriction on sites sold after January 12.

They added that ECs will continue to be popular among home buyers and they expect prices to remain stable this year.

Source: Channel News Asia

 

Tweaking EC rules to make it more "palatable"?

The average number of penthouse units in executive condominium (EC) projects has climbed slightly in the past year, according to market watchers.

The sale of a luxury penthouse recently has triggered a debate over the role of ECs.

Some analysts have told Channel NewsAsia that while ECs are still relevant, some rules could be tweaked.

ECs were introduced in 1995 and its objective is to provide alternative housing for households who do not qualify for public housing and are unable to afford private condominiums.

Recently-launched ECs often come with all the trappings of a private residential project. Such features include high quality fittings and even concierge services, but at a 25% discount in terms of prices.

But a penthouse at CityLife@Tampines stole the limelight when it was sold for an eye-catching S$2 million.

Property consultancy Knight Frank said that in 2010 and 2011, on average, penthouses made up about 3 to 5% of an EC development.

This number rose to between 5 and 6% last year.

"Developers have to think of new ways to entice buyers for their projects. One of the ways is to introduce luxurious penthouse units," said Alice Tan, senior manager of consultancy and research at Knight Frank.

"With this recent hype about the 400-square-metre penthouse unit, which was snapped up within an hour, it demonstrates that people are actually looking for luxurious living."

According to analysts, ECs still serve their purpose of providing alternative housing for the sandwiched class, but some rules could be fine-tuned.

ECs - a hybrid of private and public housing - come with ownership and resale restrictions. The buyer's income must not be more than $12,000 a month.

Currently, the government offers a grant of up to $30,000 for first-time buyers and does not require those upgrading from a public housing flat to pay a resale levy.

Mohd Ismail, CEO of Propnex suggested that the government could also put out guidelines to limit the size and number of large units within an EC project.

For example, he suggested that a penthouse unit should not be larger than 2,000sqft and larger units of between 1,200sqft and 1,500sqft should not constitute more than 15% of the development.

Meanwhile, some analysts say the trend of developing large EC units are not very different now as compared to the 90s.

Alan Cheong, director of research and consultancy at Savills said the number of sale transactions for EC units over 2000sqft remain quite similar at over two per cent on average, and the ongoing debate could be a result of rising property prices.

"All the while they had large units in ECs, people hardly made any noise until now," said Mr Cheong. "This thing is coming to haunt everyone because property prices are at an elevated level, everyone wants to have the cake and eat it and profit from it."

The government is expected to roll out more sites for EC development this year.

According to analysts, the projects will attract strong interest from developers who will continue to offer attractive EC units, comparable to those in the private condominiums.

The National Development Ministry said it is watching developments in the EC market closely and will consider further measures if needed.

Source: Channel News Asia

While we are on the subject of tweaking the EC rules, here's a thought: Why don't the Government just stipulate that penthouses be forbidden in EC projects altogether?

If the purpose of such development is truly to cater to the so-called "sandwiched class" who aspired to upgrade themselves to condominium living but are priced out of the private condominium market, these group of individuals should not be given options that they can ill-afford (technically speaking that is, as a significant number are supported by FAMA, i.e. Father and Mother Association).

And to allow such ginormous units to be built on supposedly subsidized land parcels and with grants given to eligible buyers is (in our humble opinion as always) a terrible use of tax-payers' money.

If banning penthouses in new EC projects is untenable, the Government should at least disallowed any form of grants to be used for purchase of such units.

What do you think?

EC: Easier now for second-time buyer!

Sales of executive condominiums (ECs) look set to climb higher.

This comes after the government tweaked its housing policy to allow more second-time buyers to own ECs.

Analysts said the move, however, may impact the resale prices of private condominiums.

Home buyers purchasing their second flat from the Housing and Development Board (HDB) will now have more opportunities to own an EC.

This comes after the Minister for National Development Khaw Boon Wan announced in Parliament that the percentage of ECs allocated to second-timers will rise six-fold from the current 5% to 30%.

The allocation will apply during the first month of public sales launch for EC projects.

Analysts said that out of the 5,000 ECs to be released in 2012, some 1,500 of them will now be allocated for second timers.

They added that this will also raise the interest of the "sandwich class" to own an EC.

And second-timers can also save on the resale levy when they purchase the new EC projects.

This is a fee paid by the buyer to the HDB when purchasing a second subsidised flat, and can range between $15,000 and $50,000, depending on the flat type.

Nicholas Mak, executive director of Research and Consultancy at SLP International, said: "Today's announcement will be welcomed by the second-timers because previously in the initial launch, only 5% of units are allocated to second-timers, but now 30% will be available for their selection, which means that now they do not have to be dependent on the leftover units that the first timers do not want, but they will have at least more choices at the initial start of the launch."

Analysts said the new rules may have an impact on demand for private condominiums.

As prices for ECs are about 20% cheaper than mass market private condominiums, experts said some buyers may drop plans to buy a private condo and opt for an EC instead.

However, they do not expect prices of ECs to jump higher.

Analysts expect the government to release more land for EC development and the increased supply may put a cap on prices.

Colin Tan, head of research consultancy at Chesterton Suntec International, said: "If there is any increases, it will be marginal, because I think the whole market for EC is still price sensitive; while developers can push prices up a little, they have to be mindful of the fact that this is a price-sensitive market."

Meanwhile, the move to revise the income ceiling of buyers from $10,000 to $12,000 in September last year for all EC projects has boosted sales.

Experts estimate that prices of ECs have increased between 2 and 4% since the revision.

Source: Channel News Asia

So expect more GLS and more EC launches...

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More EC, you see...

More land will be released for the development of executive condominiums (ECs) in 2012.

The Ministry of National Development (MND) says that it is prepared to supply land sites for 5,000 EC units next year.

This is part of the government's move to help more higher income Singaporeans own private housing by expanding the EC market.

The government has taken an earlier step by raising the monthly income ceiling for the purchases of new ECs from $10,000 to $12,000 in August this year.

Minister of State for National Development and Manpower Tan Chuan-Jin said that the increased income ceiling has benefited around 220 households who have booked their ECs since the widening of the scheme.

Mr Tan was speaking at the Real Estate Developers' Association of Singapore (REDAS) anniversary dinner.

The EC scheme was introduced in 1995 to provide a more affordable private housing option for Singaporeans.

Since the introduction of the scheme, 14,600 EC units have been launched by developers and 3,000 units are coming on-stream.

Still, Mr Tan pointed out that the majority of Singaporeans will continue to live in public housing.

He reiterated that the government remains committed to help first-time owners and newlyweds purchase their own homes.

But Mr Tan said that from next year, the government will begin to pay more attention to helping HDB second-timers.

On the recent move to introduce additional buyers' stamp duty, Mr Tan said that it is "natural and not unexpected" for the announcement to attract much public discussion with diverse views.

He added that the volatile equity markets and uncertainty in Europe may cause more foreign funds to be attracted to Singapore's property market.

The latest move is targeted to moderate such investment demand to avoid the need for a major correction in the future.

Mr Tan said that developers may not welcome such a move but he seeks their understanding for the good of the industry.

Source: Channel News Asia

Accelerated construction of public housing, increased number of Government Land Sales (GLS) sites and now more land release for development of ECs... The wife and I really hope that there will be enough demand over the next 3 - 5 years for all these new supply PLUS the substantial inventory of unsold homes that are already in the market.
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The Real Deals (17 November 2011)

The latest issue of focuses on the recent happenings in the Executive Condominium (EC) sector.

http://www.scribd.com/fullscreen/73240116?access_key=key-2belmdhtwui118ayqx1a

For those of you looking to buy an EC, you are likely to be spoilt for choice as the Government looks to roll out more of such projects next year. And compared to current price of  public housing under the Design, Build and Sell Scheme at around $600psf  - Trivelis, the latest DBSS launch in Clementi, were sold at about $580 psf to $728 psf - the wife and I reckon that EC is definitely better value for money. Despite having to pay about $100 - $150psf more in price, the later comes with facilities and can be privatised after 10 years.

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More on the July private home sales figure

The number of private homes sold by developers rebounded in July after falling for the preceding two months, but the outlook remains tingled with uncertainty about the state of the financial markets and the economy.

The jury is also out on the extent to which the increase in income ceiling for buyers of new HDB flats and exec condo (EC) projects will siphon off demand for mass-market private condos.

Urban Redevelopment Authority’s figures show that developers sold 1,386 private homes (excluding ECs) in July, up 17.3% from 1,182 units in June.

Developers sold 583 ECs last month, up from 212 units in June and the best showing since a five-year hiatus in new EC project launches ended in October last year. This was buoyed by the release of two projects in July – Riverparc Residences in Punggol and Blossom Residences in Segar Road. Including ECs, developers’sales surged 40.2% month on month to 1,954 units in July.

Other than ECs, which are a hybrid public and private housing, chart-topping projects in July included new projects with attractive location attributes – Skyline Residences near Telok Blangah MRT Station and with views of Keppel Golf Links and the sea (167 units sold at a median price of $1,902psf); The Miltonia Residences, with a view of the Orchard Golf Course and Lower Seletar Reservoir (124 units); Thomson Grand, boasting views of Island Golf Course and Lower Pierce Reservoir (108 units) and Seastrand in Pasir Ris (116 units), notes CBRE Research.

The rebound was helped by low home loan rates, the return of home buyers after the June school holidays and possibly some buyers speeding up their decisions to avoid buying during the Hungry Ghosts Month, which started on July 31.

“The Government’s earlier announcements on increased public housing supply and income ceiling revision have not impacted on the market significantly so far, as evidenced by the rebound in buying activity in July,” said Credo Real Estate executive director Ong Teck Hui. “However, it’s harder to gauge their impact on the private housing market over the longer term,” he added.

In the first seven months of this year, developers sold 9,425 private homes (excluding ECs) – close to the 9,966 units they sold in the same year-ago period. Some market watchers say this point to robust demand.

However, Nomura Singapore analyst Sai Min Chow points out that the latest July sales number (excluding ECs) was down 10.8% year on year. He also highlighted that the inventory of launched but unsold units has risen from 3,480 units in July 2010 to 5,010 units in July 2011 and reiterated his warning that “inventory build-up in the primary market in Q3 2011 to Q4 2012 is likely to fast track a price correction”.

CBRE noted that interest in upmarket projects remained selective in July – a unit at The Orchard Residences was sold at $4,299psf. On Cairnhill Circle, two units at Hilltops fetched $3,319psf and $3,528psf and a couple of units were transacted at Helios Residences for $3,084psf and $3,488psf.

After July’s strong sales, most market watchers expect a slowdown again this month due to the Ghosts Month as well as greater caution among buyers in the face of turmoil in financial markets and weak sentiment on the global economic front. Jones Lang LaSalle is predicting 900 – 970 unit sales in August. Colliers too forecasts the figure could slip below the 1,000-unit mark. Credo’s figure is 800 – 1,100 units.

Many analysts reckon that some of the demand for new mass-market private condos could be siphoned off into new EC projects, as the household income ceiling for new EC buyers has just been raised from $10,000 to $12,000. However, Knight Frank chairman Tan Tiong Cheng suggests this may not happen if developers are nimble with pricing.

“Seeing the writing on the wall, developers who have already bought land for mass market private condos and who have sufficient margin, could elect to lower their price expectations a little if they wish to move units.

“Some potential buyers who were previously stretched by developers’ pricing strategy for new private condo launches may then be wooed back.

Colliers’ consultant (research and advisory) Tay Huey Ying points to two potential bright spots for the private home sales market – low interest rates and a potential influx of another round of hot money from troubled western nations.

DTZ Southeast Asia chief operating officer Ong Choon Fah offers some advice to those trying to find their ways in murky waters: “To each his own, and potential buyers have to do their homework and know how much risk they can afford to take.”

Source: The Business Times

To expect the July sales numbers to be impacted by the government’s earlier announcements is somewhat unrealistic, since the stock market was still booming for much of the month while all the talks about increased public housing supply and income ceiling revision were well… just talks.

But now that the Prime Minister has made the announcement during his NDP Rally speech last Sunday, the August sales figure is likely to be hit with a triple whammy of revised regulations for public housing/EC purchases, the financial market turmoil amid global economic uncertainties and the typical lacklustre purchasing sentiments during the Hungry Ghosts Month. So the wife and I will not be too surprised if the August figure (excluding ECs) drops to between 800 – 900 units.

And speaking of ECs, we believe that this is now a more attractive option (given the raised income ceiling to $12,000) for upgraders or new home buyers compared to neighbouring mass-market projects. Most ECs these days have facility offerings and quality of finishing that are comparable to their private condo counterparts. ECs are also

• Built closer to HDB estates (imagine: wet markets, supermarkets, HDB neighbourhood shops and malls = amenities galore that’s within walking distances)

• Fully convertable to private status after 10 years

• Can be resold to locals after 5 years.

Given the $300 – 400psf price difference between new EC (median price for Blossom Residences: $702psf) and new private condo (average price for Foresque Residences: $1,100psf) and with the new SSD (Sellers’ Stamp Duty) in play, the wife and I will definitely be looking to buy a EC rather than the condo next-door if we are moving to Punggol or Bukit Panjang. This is assuming we qualify, of course…

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