Does a HDB or EC make a better first home?

For many first-time home-buyers in Singapore looking for public housing, you have 3 choices- a BTO, resale HDB and Executive condominium(EC). Those who want to be able to move into their new place as soon as possible will naturally go for a resale HDB, but if you want something spanking new altogether, you’ve got to make a choice between a BTO and EC.

It is not unusual that most parents will probably advise that you get a BTO as a new home. After all, most of them were able to make a neat profit margin selling their BTOs during their time. But ECs are a relatively new type of housing type offered by the government, and for most people who are in the “sandwich” class, it can be a great compromise combining privatised living with subsidised affordability. What’s more, the fact that ECs become completely privatised after 10 years adds on to their attractiveness as a way to make some substantial profit gains.

So if you are currently deciding between getting a BTO or EC as your first flat, read on.

1. Affordability

In terms of the absolute amount of money you’d need to put up, there is no doubt that a BTO is a much more affordable choice compared to an EC. For instance, a 5-room BTO flat in Tampines would go for an indicative price of around $400,000-$460,000 at 110 sqm. That comes up to about $388.50 psf. Comparatively, a 3-bedroom EC at 114 sqm will cost you between $930,000 to $975,000, which comes up to $758 psf. As you can see, the EC will cost you twice as much to buy compared to a BTO.

Now, remember that you will pay for your home over at least 20 to 30 years. After splitting the cost into monthly repayments, the difference may not be as jarring if you are using your CPF to pay, but what can be a huge problem for some is the downpayment(read point 2).

Other than the cost of the apartment, other costs that you need to consider include the maintenance costs you’d need to pay for an EC, which can come up to between $200 to $350 per month. Stamp duties and legal fees are also significantly higher for an EC.

2. Downpayment

While both EC and BTO are considered public housing, the fact is that EC is a type of hybrid housing which is part private and part public. As such, an EC-buyer will not be eligible for the HDB concessionary loan. This impacts the downpayment because taking up a bank loan only allows you to borrow up to 80% loan-to-value, which means you need to put up 20% as downpayment.

Comparatively, those who have less cash would probably prefer to take up a HDB Concessionary loan for HDB flat since you can borrow up to 90%, although current interest rates at 2.6% is considerably higher than what bank loans are offering.

So for instance, if you are buying the EC at $930,000, you’d need to put up a downpayment of $186,000, with at least 5% or $46,5000 in cold, hard cash and the remaining in CPF.

3. Eligibility

Criteria for buying and EC and BTO is largely the same, except for the income ceiling. For a 4-room flat or bigger BTO, the average gross monthly household income is at $12,000, while for an EC, it is at $14,000. At first glance, you may not feel that it affects you, but with most Singaporean’s mentality to get a BTO and then upgrade to an EC later, the $14,000 EC income ceiling may be hit for many PMETs couples who will probably be in their mid 30’s when they decide to do an upgrade.

4. Grants

One advantage of buying a public property here is that you may be eligible for a number of government grants which can be pretty substantial. For first-time buyers of BTO, your housing grant amount will vary greatly depending on the household income. For low-income earners with an average monthly household income of up to $1,500, your grant will be at the maximum amount of $40,000, but for a PMET couple who earns up to $8,500, your housing grant will be at $5,000.

EC-buyers are likely to be able to enjoy a higher grant amount:

Source: HDB

5. Renovation costs

ECs typically come fully-furnished with the necessary fittings so renovations costs can be a kept to a minimal if you aren’t fussy about the interior design. For instance, the flooring would already be done, toilet fittings are in and you should also have built-in wardrobe. In that sense, you’d likely to be spending much less in terms of renovations as compared to a BTO unit.

Summary of all costs

Buying an EC is obviously a more expensive choice, but many Singaporeans continue to go for it because of its resale value. The fact is that after 10 years, the EC becomes a completely privatised condominium, and looking at historical values, the probability of making profit is quite high.

Source: OrangeTee

According to research by property consultant Orange Tee, the 21 ECs that are more than 10 years old shown in the chart all made gains after privatisation, though the same can’t be said if one were to sell after the 5 years minimum occupancy period.

For the financially prudent, buying  BTO can be an affordable choice. A low cash outlay and lower price point definitely make for peace of mind for those who are just starting out in the working world. However, for those who have deeper pockets and are looking for higher capital gains, an EC can be a sound investment choice. Having the assurance that your home is highly valued in the market can bring a different kind of “peace of mind” if you decide to move again in later years.

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