Buy EC or BTO?
The word on everybody’s lips these days seem to be BTO, short for build-to-order flat. It’s so popular that the phrase most commonly used in marriage proposals has evolved from “Want to buy a HDB with me?” to “Shall we apply for BTO?”.
This year, the Housing and Development Board (HDB) announced that 15,100 BTO units were launched, and this does not include sale-of-balance flats.
However, BTO flats are not the only affordable public housing available. Executive condominiums (EC) are hot property too, especially for those who want to enjoy the amenities of a private condominium at a subsidised price.
Here are 8 differences between an EC and a BTO:
1. Income ceiling
The income ceiling for BTO flats was recently raised from $10,000 to $12,000 for most units. Those applying 3-Gen flats have an income cap of $18,000.
The income ceiling for EC units was also recently raised from $12,000 to $14,000 to allow more families to own such homes.
2. Priority for first-time buyers
According to HDB, a higher proportion of BTO flat supply per launch is given to first-time applicants. This group of buyers will also be given more ballot chances, and additional ones for unsuccessful attempts.
For those interested in ECs, 70 per cent of the flat supply will be reserved for first-time buyers during the one-month period of its launch.
3. Pool of eligible resale buyers
BTOs and ECs start out as subsidised public housing, but the latter will eventually become listed as private property after 10 years. This opens up the pool of eligible buyers should the homeowner want to sell his unit.
Under HDB resale rules, only Singapore citizens and permanent residents are eligible for public housing. However, once ECs pass their 10th year mark and attain private property status, foreigners and companies immediately become eligible buyers.
The pool of prospective buyers thus becomes a lot larger for EC homeowners.
4. Resale profit
According to some experts, there isn’t a substantial difference between BTO resale prices and new BTO prices.
SG Property Reviews compared the May 2015 BTO launch of Clementi Crest and a resale flat in Clementi Ave 3 that was sold during the same month. Both flats are located near each other. However, while the 4-room BTO was quoted with a price upwards from $478,000, the price for the resale flat was listed at $500,000, bringing the difference to only $22,000. With this in mind, resale profits are not projected to be lucrative.
On the other hand, an EC may be sold at a subsidised price, but in most cases, homeowners are able to list their units at resale prices comparable to that of private condominiums in the same area.
In the case of La Casa, an EC in Woodlands which is three years away from privatisation, units were resold in the last three months of 2015, at prices ranging from $800,000 to $900,000. Nearby, units in private condo Rosewood, had resale prices of between $815,000 and $1.07 million in the same time period.
As ECs are built by private developers this property type comes complete with the same amenities private condos. These include well-designed landscaping, security, swimming pools, the condo clubhouse and access to multi-purpose rooms and tennis courts if available. On the other hand, BTO units do not come with any facilities.
The standard finishes in an EC are the same as a full-fledged private condo. These include flooring for the whole unit, built-in kitchen cabinets, hob, hood and oven, bathrooms with vanity top and air-conditioning installed for the whole house as well as electrical points. Most ECs even provide built-in wardrobes for the rooms.
BTOs usually don’t provide as many finishes as ECs do. The basic finishes would include wall tiles for bathrooms, kitchen floor finishes as well as a household shelter and a service yard.
At the end of the day, BTO homeowners would have to fork out additional sums for more renovation work and installation of electrical wiring as well as air-conditioning.
First-time buyers for BTOs are eligible for Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG). Both grants will offer buyers up to $40,000 each depending on their household income.
On the other hand, first-time buyers for ECs can apply for the Family Grant and receive up to $30,000 depending on their household income.
Besides housing grants, buyers of ECs and BTOs must also take note that there are different types of loans available for each property type.
BTO homebuyers can choose to apply for a bank loan or a take housing loan from HDB. Note that the two loans are mutually exclusive. ECs homebuyers can only apply for a bank loan.
HDB’s housing loan has a loan ceiling of up to 90% of the flat’s purchase price and the maximum repayment period is capped at 25 years, or up till the buyer is 65 years old, whichever is shorter.
Meanwhile, bank loans cover up to 80% of the unit’s valuation and the maximum repayment period is 30 years.
Do note that all bank loans taken for BTO flats and new EC units are subject to Mortgage Service Ratio (MSR), which mandates that buyers can only use up to 30% of their gross monthly income for mortgage repayment.
So the question is still ‘Buy EC or BTO’? I think this is subject to your affordability. Therefore, it is always utmost important to have your financial planning with your own banker before decide.