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In the realm of real estate investing, one question that often arises is whether Executive Condominiums are an unequivocal path to financial success. These properties, known for their luxurious amenities and typically better strategically located, have captured the attention of many first-time buyers.
However, like any investment, it's crucial to approach Executive Condominiums with a well-informed perspective and know that not all real estate investments actually guarantee a 100% return.
So what property makes and doesn’t make money? Read on to find out more.
Exploring the Appeal of Executive Condominiums
Executive Condominiums, often referred to as ECs, merge the best of both worlds - the comfort of condominium living with the affordability of public housing.
These properties are developed by private developers and approved by the government, offering a range of amenities such as swimming pools, fitness centers, and lush landscapes. The appeal of ECs lies in their luxurious lifestyle and potential for appreciation.
When you purchase an Executive Condominium (EC) unit from a real estate developer, you may be eligible to receive a housing subsidy of up to $30,000 under the CPF Housing Grant Scheme. If you would like to check out if you are eligible, do click on the link here.
Most importantly, ECs are in a way discounted private condominiums catered towards Singaporeans while still allowing Singaporeans to sell to foreigners once they have met the minimum MOP (Minimum Occupation Period).
The Investment Potential
Yes, it’s true that investors are drawn to Executive Condominiums due to their high potential for significant appreciation over time. A 10% return on a $500,000 HDB can never be compared to a 10% return on a 1.5 million EC. The earning difference is $100,000!
Apart from that, ECs have a larger pool of buyers while HDBs can only be sold to Singaporean or PR. This means that EC can have a healthy amount of transaction volume, showing clear price data.
Over the last 5 years, we have seen significant capital gains from these asset classes. Sol Acres, which recently MOP on 12 March 2023 has seen an average annualized 9.3% gain.
It's truly astounding to discover the potential of earning over $300,000 in capital appreciation through the sale of a one-bedroom unit in Singapore. Generally, one-bedroom units are perceived to possess a rather ordinary design and lack remarkable attributes. Consequently, homeowners tend to steer clear of such properties for their own occupancy.
However, given that its price range is typically more affordable than regular private condominiums, it does help attract a niche group of buyers looking for certain layouts.
ECs are always Developed in Up-and-Coming Areas
In order to keep the prices of ECs low, they are usually been developed in non-matured estates. This means the potential for capital appreciation for these investments can go appreciation faster as compared to matured estates.
If you are looking for available ECs right now, there are still available units up for grabs at Altura EC in Bukit Batok. If you would like to find out more about the investment, be sure to check out our article here.
Examining the Risks
While it's true that the last 10 recent MOPs did make a profit, we can discount the reality that property investing comes with risks that we as property investors need to take note of.
We have been in a Bull Market for the Last 5 Years
Ever since 2017, the property market has only been on the rise and only recently we have seen the first dip in Q2 2023. We know that the property market comes in 4 cycles which are:
Expansion
Decline
Recession
Recovery
Although Singapore has gone through similar recessions in the past, we never know how much the property market may tank, and investing for the long term is always the smarter investment choice.
We May Face Interest Rates for a Long Time
With inflation maintained above the desired 2% in the US, the US Federal Reserve has initiated higher interest rates to keep inflation under control since March 2022. This has led to lesser borrowing and higher costs for borrowers all around the world.
Until we see the inflation rate being kept under control, we may have to pay for higher interest rates for a longer time. During such time, it will cause investors to be more conservative with their investments.
Hard to Get Executive Condo
You may have heard from a friend or family the difficulty of getting an EC. Unlike getting a BTO or resale flat, the requirement needed to get an executive condo requires more barriers to entry such as higher income and a limited amount of debt you can take.
If you would like to know more about what are the financial considerations you need before getting an EC, do check out this article here. When you actually sit down with an agent to discuss the financial requirements needed, owning a property might actually be affordable!
Is it Worth it to Get an Executive Condo?
While Executive Condominiums promise to be a profitable investment, they are not a guaranteed path to financial success. Like all investments, careful consideration, research, and risk management are essential. Investors should leverage professional advice, stay updated on market trends, and adopt a diversified approach to maximize their chances of success.
By understanding the intricacies of the market and making informed decisions, individuals can harness the potential of Executive Condominiums to build a rewarding investment portfolio.
Once you actually sit down and calculate your finances, property investing is quite affordable and our government has done a great job implementing the TDSR(Total debt servicing ratio) to protect Singaporeans from overleveraging and make sure that everyone is able to live comfortably with their property investments.
FAQs
Is it wise to invest in Executive Condominiums for rental income?
Investing in ECs for rental income can be a lucrative endeavor. However, it's crucial to evaluate rental demand in the specific location and determine competitive rental rates. Additionally, understanding landlord responsibilities and property management is essential for a successful rental strategy.
Are Executive Condominiums suitable for first-time investors?
Can I sell my Executive Condominium before the Minimum Occupation Period (MOP)?
How does the government regulate Executive Condominiums?
What are the key differences between ECs and private condominiums?
How can I assess the potential appreciation of an Executive Condominium?