- Timothy

# Can you afford to purchase an Executive Condominium? A simple exercise.

Updated: Feb 27, 2020

*disclaimer. I am not a property agent, or affiliated in any way to the real estate industry. The post below is of my own personal opinion based on my first-hand knowledge of attempting to purchase an EC. At the point of reading the information may already be outdated, and the onus is on the reader to update himself/herself on the latest happenings.

If an Executive Condominium is one of the cards on your hand, one of the things that you will first consider is the affordability.

Affordability Most people would advise that you should buy the best house that you can afford. That is easier said than done, especially if you’re considering an EC.

Financially, I would recommend for the couple to only consider applying for an EC if their combined income is $10,000 and above.

Here’s a relatively long example, but if you try to stay with me throughout this exercise, you should be able to understand why I say so.

Let’s begin.

Using the psf of HDB flats as an example, here are the standard sizes you can expect to get out of different flat types:

EC Flat Type

Square Feet (sqft)

Square Metres (sqm)

2-room

645.8 to 699.65

60 to 65

3-room

968.75

90

4-room

1184

110

Firstly, note that there is a difference in the naming convention for a HDB flat vs an EC. In a HDB, a 4-room flat has only 3 bedrooms. In an EC, a 4-room flat has 4 bedrooms.

Also, depending on the developer, an EC will usually offer different flavours within a certain flat type.

For example, the latest project I wanted to ballot for had 9 different types of 3-room flats. The chief difference was the area size, going from the smallest at 883 sqft, to the largest at 1130 sqft. The smaller units were the bare-bones ‘basic’ ones, while the larger units could accommodate an additional study room or a utility room.

Now, you have to take what I say next with a pinch of salt. From a extremely generalized viewpoint, the average per square foot (psf) of an EC in Singapore is $791.67, with some example data shown below.

Okay, revisiting our table above, if we were to add in the psf price to fetch the total price of a unit…

Flat Type

Square Feet (sqft)

Square Metres (sqm)

Average Price

2-room

645.8 to 699.65

60 to 65

$511,260 to $553,891

3-room

968.75

90

$766,930

4-room

1184

110

$937,337

Again, this is super duper generalized as the psf price depends on a lot of factors, the first and most obvious of which would be the location of the EC. Second, the psf will be higher if you choose to stay on a higher floor (the average price increment is roughly about $3000 per floor level increment vs HDB’s $1000 per floor increment). There are obviously more which I am not privy to.

Looking at the chart above, then, for a 3-room flat (a.k.a. equivalent to a HDB 4-room), one can expect to pay about $766,930. For the unit I was considering (pool facing + 14th floor), I was looking to pay about $809,000 for a 883 sq ft apartment. That is almost $40,000 higher than what is shown in the table above. Taking the 3-room flat in the table above as an example, this is the amount that you will be expected to pay:

Payment Type

Amount

5% Down Payment (in cash)

$38,346.50

15% Down Payment (in CPF + Cash)

$115,039.50

80% Bank Loan

$613,544

Buyer Stamp Duty

$17,607.90

Legal Costs

~$2500

Total Damage: $787,037.90 That’s a lot of money. Especially if you’re a first-timer, the 20% down payment will most likely wipe out your life savings + CPF balance. In addition to the purchase price of the apartment, there is also the Buyer Stamp Duty* and the cost of hiring a solicitor.

Don’t forget, for a bank loan, you will need to put down 5% in cold hard cash.

Remember that we haven’t included the other fees yet:

Fire Insurance

Mortgage Insurance

Monthly Maintenance Fee

*Buyer Stamp Duty: 1% for first $180000, 2% for next $180000, 3% for the remaining balance.

How much will I be paying monthly? You need to be mentally prepared to ride on the SIBOR rollercoaster when you purchase an EC. You’re not eligible for a HDB loan, which offers a flat 2.6% (or 0.1% above the prevailing CPF OA interest rate). Instead your loan will be pegged against the SIBOR rate, which is essentially the interest rate at which banks loan and borrow money from each other.

With the bank loan being about $613,544, assuming that the SIBOR rate is 2% and that you are maxing out your loan tenure to be of 30 years, your monthly payments would work out to be about $2237 per month.

Assuming that you and your spouse are aged 35 and below, your CPF OA contribution rate is 23%. What this means is that 23% of your wages is pushed into your OA.

Working backwards, your combined monthly salary needs to be about $9726, if you want to pay everything off by CPF. This figure takes into account the fact that your entire OA would be wiped every month just for mortgage payments.

Lastly, remember that we are currently in a period where interest rates will rise. It’s just a matter of time. Whenever the Fed raises the interest rates, we will be negatively affected. We will need to pay more, with the extra going towards the interest. This is especially important to note if you’re taking a longer loan tenure.

Type of Grants There are a few grants available that may help you offset the total cost, on a tiered basis depending on your combined income level:

Note that you’re on your own if your income is from $12,000 to $14,000. What happens after $14,000? You’d have lost your eligibility to purchase an EC, and the only available options for you would either be a resale flat or a private condominium.

Summary Okay, I hope that this simple numbers exercise has helped you see why I feel that a couple should earn $10,000 and above in order to even consider buying an EC. Remember that the numbers we played around were generalized averages and the total cost may be higher depending on your flat preferences.

The crux of the whole matter to consider together as a couple is this: what are your intentions, or motives, of purchasing an EC? Nobody needs to buy an EC. A HDB is more than enough for living in. Think long, think hard, and good luck on your journey 🙂