More buyers of Executive Condominium units are backing out than those who opted to buy private properties based on the latest data shared. There are only 8 EC projects available for the market currently. However, the 2,777 units or 30% units returned to developers came from these ECs August.
This was determined based on the monthly analysis performed by Square Foot Research.
Executive Condo units or ECs combine the features of public and private houses. They are offered for sale under the Housing Board restrictions.
Skypark Residences at Sembawang has 22 units returned which made up the highest among all EC returns. This is followed by Forestville in Woodlands with 18 returned units, Ecopolitan with 14, Waterwoods with 12 and Sea Horizon in Pasir Ris with 10 returned units.
As suggested by the consultants, one possible reason to this is the rising prices of ECs which went beyond record levels. The lower Mortgage Servicing Ratio or MSR may also be the cause since it has restricted the monthly housing payment to 30% of the owner’s gross monthly income.
While the significant number of returned units could be because of the impulsive buying decision and the buyer’s discovery of possible MSR loan for such property. It could also be the realization of the buyers lack of capacity to afford the units.
The sentiment shared by the market is for the prices of the property to become better and the possibility of higher returns in case prospects find other opportunities.
Experts also claimed that one possible reason is the eligibility of the buyer to avail EC units. One of the restrictions is that EC buyers cannot have a combined gross monthly income higher than $12,000. They must also live in the unit for at least five years in case they are not the first-time buyers.
Returns could also be because of cancelled marriage because the Housing Board requires buyers to a form a family in order to avail EC units.
However, there are specific penalties for returning units to developers. For those who obtained EC land after December 9, a penalty amounting to 5% of the total property price is imposed after the agreement is exercised. The rest will be 20% of the unit price. In case, the sales agreement has not been implemented, there is a penalty of about 1.25% of the buying price.
Despite the returns, demands for ECs are still good even high because they are more affordable if compared with private homes. The amount of returned EC units will remain dependent on the number of sales transactions.