Many of us have heard of resale HDBs, but what about resale ECs?

Resale ECs refer to EC (executive condominium) units that have already hit the 5-year MOP and whose previous owners are selling them on the open market. Typically, resale ECs are good options because of their affordable entry price.

In this blog post, we tackle four questions that people have about buying resale ECs!

  1. Who’s allowed to buy a resale EC?
  2. How do I finance my resale EC?
  3. What’s the difference between resale EC and private property?
  4. What should I look out for when buying a resale EC?

 

Firstly, who’s allowed to buy a resale EC?

To buy a resale EC that’s between 5 – 10 years old, you must of course be a Singaporean citizen or a Permanent Resident who’s at least 21 years of age.

The good news: you don’t have to conform to any of the existing eligibility schemes for new ECs if you’re looking to buy a resale EC! In other words, if you’re interested in a resale EC,

  • You don’t need to form a family nucleus (which means none of the family nucleus schemes apply to you)
  • There are no income ceiling caps or requirements
  • You can own both a resale EC and another private property
  • If you’re a Singapore citizen, you can own both a resale EC and a HDB property at the same time (as long as you’ve met the MOP for your first property)

But PR buyers cannot own a HDB flat and resale EC at the same time—they must dispose of the HDB property within six months of buying the resale EC, even if they’ve hit MOP for the HDB unit.

 

Alright, how do I finance my resale EC?

Obviously, money is a huge part of every property transaction. The same goes for even the most affordable resale ECs.

Just like new ECs, resale ECs are sadly not eligible for HDB housing loans. This means that if you want to buy a resale EC, you have to take a bank loan.

In this case, you can buy a resale EC using a private property payment scheme: if you don’t have any unpaid loans, you can take out a 25% down-payment and get the remaining 75% covered by the bank. 

Out of this 25% down-payment, the first 5% is covered in cash. The remaining 20% can be covered by a combination of cash or your CPF OA savings.

That being said, do be aware: when taking out a bank loan for resale EC, your total monthly debt obligation to the bank is capped at 60% of your monthly income under the TDSR (Total Debt Servicing Ratio) and not the Mortgage Servicing Ratio!

 

What’s the difference between a resale EC and a private property?

There is plenty of confusion surrounding resale ECs and private property. This is understandable, especially because ECs are privatised after 10 years.

Simply put, a resale EC refers to any EC on the open market that has exceeded the five-year MOP: the unit being sold could be anywhere from six to twenty years old. 

If the resale EC in question is between 5 – 10 years old, it can only be sold to Singaporeans and PRs. However, once the resale EC exceeds 10 years old, it is considered private property and can be sold to foreign buyers.

On the other hand, there are no such restrictions on private properties (in this case, condominiums not built under the EC scheme and hence are privatised from the start). Foreigners can buy private properties of any age and there is no MOP requirement. 

 

So, what should I look out for when buying a resale EC?

Before taking the plunge, you should have a list of the following considerations noted down somewhere!

  1. “What’s my budget and personal preference?”

The price of a resale EC varies from property to property, but typically it’s far more affordable than a private condominium! 

If you’re looking to upgrade and don’t mind its age and type, a resale EC is also a good option as it’s more immediately available, compared to new ECs which have to be constructed first and are incredibly competitive. 

However, resale ECs can be more expensive than a new EC because of how large the upfront down-payment is. Despite the lack of HDB housing loans for all ECs, buyers of new ECs can take advantage of CPF housing grants (provided it is eligible) and the PPP (Progressive Payment Scheme) that starts with a lower down-payment that gradually increases. On the other hand, as mentioned earlier, the 25% down-payment for a resale EC is significantly higher, which also means digging into CPF is much riskier.

On top of that, as mentioned above, depending on when you purchase it, resale ECs are subject to the TDSR instead of the MSR. Take for instance this example:

Assume that a couple with a combined income of $12k plans to buy a 3-bedder new EC. Since it’s a new EC, they’re subject to the MSR, which caps loan obligations at 30% of combined monthly income. That means they can take a loan of up to roughly 800k.

Should they choose to buy a resale 3-bedder EC, their loan obligations will fall under the TDSR (60% of monthly combined income) and they can take out a loan of up to $1.6 million.

In essence, you may take out a larger loan under the TDSR by buying a resale EC, but it also means you’ll have a higher monthly mortgage to take care of . So, if you prioritise moving in quickly and can afford it or are confident to handle the monthly mortgage installment, a resale EC is the option for you! But if you can afford to wait and want to pay more slowly and safely, a new EC is a better bet.

  1. “Am I interested in the home as my investment strategy?”

Resale ECs are usually much cheaper to buy than private condominiums. On top of that, they are privatised after 10 years, which means that they also become private property! Essentially, you’re getting potential private property at a lower price. 

Here’s a study proving that a resale EC can be just as worth it as a private condominium! A research study found that while new ECs were priced 20% lower than a private condominium (this is due to sales restrictions, government regulations and differences in land and construction costs—after all, ECs are a public-private housing hybrid), this gap narrows down to 9% after MOP and 5% upon privatisation. 

In other words: buying a resale EC (one that has reached MOP) is still cheaper than a private condo, but flipping it and reselling it again for investment will reap you almost as much profit as a private property, especially once your unit is privatised at 11 years old.

This means that resale ECs are good, affordable options if you wish to turn your home into your investment strategy: you can flip the resale EC and sell it as private property on the market when the time is right and reap the profits, or rent out the entire unit. 

  1. “What are the features of the resale EC?”

Resale ECs have usually been lived in, so some wear and tear is inevitable.

However, you should definitely still pay attention to the physical state of the property, as this may have implications on your finances and even your investment strategy! If the resale EC requires major repairs, such as cracked walls or damaged utilities, the high costs of getting these fixed may significantly eat into your budget. This also reduces profit if you rent or flip your resale EC as much of the income goes into covering repair costs.

On top of that, if you’re buying a resale EC with an eye towards property investment, the same considerations that apply to new ECs can also be relevant here. Factors such as the location, accessibility and proximity to amenities all make or break the attractiveness of your resale EC if you choose to rent or flip it. 

 

Conclusion

As you can see, buying a resale EC involves many nuances and unique considerations!

No property transaction is without its complexities, but the distinct features of resale ECs can be complicated. But don’t worry about that.

If you ever need help weighing your options and making a decision, we’re here to help.

Drop us a call for a no-obligation chat. With our resources and experience, we can guide you through the process.

Thank you for reading and stay tuned for our next post!

 

Resources

https://executivecondominiumsingapore.com/ec-eligibility-to-buy-resale-ec/

https://hollandproperty.com.sg/executive-condominium-ec-a-comprehensive-buying-guide/

https://www.propertyinvestorinsights.com/5-blindspots-unaware-ec/