Executive condos gain cachet as resale units generate windfall profits
SINGAPORE — Executive condos (ECs) are gaining favor with Housing Board upgraders as the gap between the median prices of new ECs and new suburban condos has widened in recent years.
ECs are a mix of private and public housing built by private developers but sold at lower prices compared to private condominiums. They tend to be attractive to first-time Singapore homebuyers and, in recent months, HDB upgraders faced with rising interest rates and heightened macroeconomic uncertainty.
This is evidenced by the robust uptake of the 639-unit Copen Grand in Tengah and the 618-unit Tenet in Tampines on their launch dates.
In December, Tenet sold 447 units, or 72 percent, at an average price of approximately $1,360 per square foot (psf). Copen Grand sold 465 units or 73 percent at its launch in October at prices averaging $1,300 per PSF and was fully sold a month later.
In 2022, median prices for new EC homes were 33 percent lower than new suburban condos, compared with a 27 percent discount in 2021 and a 23 percent discount in 2019, noted Ms. Tricia Song, research director of CBRE for South East Asia.
On the other hand, the mean price differential between new and resale ECs has narrowed as resale EC prices have increased faster than new EC prices. The discount fell from 28.6 percent in 2019 to 18.5 percent in 2022, noted Christine Sun, senior vice president of research and analytics at OrangeTee & Tie.
Average resale prices for e-cigarettes increased 31.9% to $1,129 psf in 2022, from $856 psf in 2019. New EC prices, on the other hand, increased 21.5% to $1,338 psf, from $1,101 psf im same period.
But even as buyers of Copen Grand and Tenet were excited, rising mortgage rates and a gloomy economic outlook hit new EC sales for all of 2022, falling 26 percent to 1,471 units, from 1,983 in 2021.
However, that decline is marginal when compared to the 45 percent drop in overall new home sales from 12,536 in 2021 to 6,850 in 2022. In the suburbs alone, new home sales fell 42 percent from 6,838 in 2022 to 3,946 in 2022 back in 2021, according to CBRE.
That’s because ECs have become attractive assets, with an earnings analysis by OrangeTee showing more than 450 units generated $500,000 in resale profit as of Jan. 1.
More buyers are finding ECs affordable, especially after prices for new suburban condos rose to over $2,000 per PSF last year, Ms. Sun said.
“Given their relatively low entry prices, many ECs have reaped hefty profits in recent years. New EC supply is also expected to be low over the next two years. As a result, despite the cooling measures, demand could remain stable,” she added.
OrangeTee’s study is based on a sample of 4,806 caveats drawn from a database of 28,009 new EC transactions between 2007 and January 1, 2023. The remainder of approximately 23,000 units were either not offered for resale or no reservation was made.
A majority of the 4,806 EC units sampled were resold within 10 years of the date of purchase, each generating approximately $314,000 in gross profit. In 2021, an EC unit for resale at [email protected] made a record gross profit of $1.38 million, followed by another unit at The Quintet in Choa Chu Kang which made $1.02 million scored
Larger EC units tend to generate higher profits. The study found that 3,055 units (between 800 square feet and less than 1,200 square feet) brought in an average gross profit of $286,621 each, while 1,250 units (between 1,200 square feet and less than 1,600 square feet) brought in $384,962 each.