[Case Study] Should You Buy An Executive Condo Or A BTO?

So you’ve bought the diamond ring, got on bended knee, and made her say yes.

Things are looking great!

Both of you eagerly and excitedly looking towards a beautiful future together.

Inevitably, the time has come to decide where your love nest should be.

And because it is your first time searching for a home… you naturally turn to friends and relatives for advice.

Now… I’m not one to generalize but I have a nagging suspicion that MOST of them will refer you to the ‘safer’ route… Do as most Singaporeans would… Get a BTO.

However…

Despite their undoubtedly well-intentioned advice…

You might start asking yourself… “Is that truly the best way forward? Is it truly still… THE safer route?”

Well my friend… There is a better alternative.

Get an Executive Condominium instead. (*If it’s within your means)

Ok I’ll admit.

Obviously, this isn’t an option every Singaporean can take.

So if you have done your sums and found it out of reach, please don’t feel left out. Other opportunities will come.

But if you have checked your sums and the numbers make sense, then you’d definitely want to read on…

Because in the next few paragraphs, I will be sharing with you (with proof) why owning an EC beats owning a BTO as a first property… IF you are concerned about reaping a huge profit in capital appreciation in the next 10 years.

So let’s get started!

A HDB Flat Was Never Meant For…

Investment.

Yes. Your parents’ HDB flat might have doubled in value over the past ten years.

Your grandparents’ HDB flat might have quadrupled in value over the past few decades.

Well guess what?

So did the price of the same Kopi-O which used to cost 50 cents per cup.

In fact:

The brief period when Cash-Over-Valuation (COV) was the main focal point was just about the only feasible time where sellers could make a HUGE profit of their HDBs.

Cash-rich Singapore Permanent Residents (SPRs) willingly paid high premiums for HDB flats that they deemed were value for money.

And just look at the damage it did to the HDB resale market.

Young Singaporean couples were priced out of owning a home. Lots of discontent and unhappiness ensued.

Fast forward to today… that ship has long sailed.

SPRs will now have to wait a total of 3 years after gaining their PR status before they are eligible to purchase a HDB resale flat.

Coupled with the reduced 30% Mortgage Servicing Ratio and revamped home valuation process, HDB flats have successfully reverted to what they were originally intended to be – Public Housing.

BTO Prices Aren’t Anything To Shout About

It’s true.

With prices pegged to the resale market, prices aren’t as competitive as they used to be prior to the introduction of COV.

Just take a look at one of the recently launched BTOs – Clementi Crest.

Estimated prices of the 2nd floor units in Clementi Crest. Source: HDB

A second floor 4 room flat in Clementi Crest would likely cost $478,000 onwards.

To put things into perspective, let’s compare it to a transacted unit just across Clementi Avenue 3 at the time the BTO was launched.

Transacted price of a 2nd floor unit in Blk 430 Clementi Ave 3. Source: SRX

Location wise, there isn’t much to separate both properties. (Except the fact that residents in Blk 430 will have to cross one additional road to reach the various amenities.)

Price wise, the difference isn’t substantial either.

Purchasing the BTO gives you a discount of $22,000 off the price of the resale flat. (Shocking… I know.)

And if you add in the various CPF grants for the Resale Flat… It might even make more sense to buy the resale flat instead!

So my friends… Before you jump onto the BTO bandwagon, don’t do it without firstly checking your potential upside.

Alright. Let’s now move on to something more positive shall we?

ECs Are Heavily Discounted Condominiums (With A Catch)

If you have ever stepped into an Executive Condominium showflat, you’d immediately recognize that the finishings and materials used are comparable to that of a full fledged condo.

The only difference mind-boggling difference is the disparity in prices. And of course, the restrictions that come along with your EC purchase. (More on that later)

Now if you know me by now… No claim is made without a case study to back it up.

So recently, a new EC – Signature @ Yishun was launched.

And here are some of its recently transacted prices:

Transaction prices of recently launched Signature @ Yishun. Source: SRX

From the transactions, you can tell that the average psf of units sold there was $750.

Here’s where it gets interesting.

Nearby this newly launched EC are two full fledged condominiums.

• Skies Miltonia

Transaction prices of Skies Miltonia. Source: SRX

• The Miltonia Residences

Transaction prices of The Miltonia Residences. Source: SRX

A closer inspection of the recent transaction prices reveal that buyers are paying an average of $1,000 psf for units in these condos.

That’s a whopping difference of $250 psf!

And just to illustrate what this $250 psf difference means…

Take a look at the worked calculations below.

Assuming you buy a 1,000 sq ft 3 bedroom unit in Signature @ Yishun.

“Value” of the unit – 1,000 sq ft x $1,000 psf = $1,000,000

Actual price you pay – 1000 sq ft x $750 psf = $750,000

Your immediate discount?

$250,000.

That’s the potential profit you could stand to realize even if property prices remained stagnant for the next 10 years!

And by the way…

I have not even factored in the $30,000 in CPF grants that First-Time buyers are eligible for…

Now at this point, I know exactly what you might be thinking in your head.

“But an executive condominium is always inferior to a full fledged condo! How can you assume that its prices will be comparable to the surrounding condominium?”

Well fret not… I’ve got that part covered for you too. 😉

While I can’t possibly tell you what will happen 10 years from now, I can definitely take you 15 years back in time and show you what happens to an EC after 10 years.

You ready?

A 15 Year Comparison – Parc Oasis vs Westmere Executive Condominium

Introducing our first contestant… Parc Oasis Condominium!

Total units – 950

Completed in – 1994

• Next to Chinese Garden MRT
• One train stop away from Jurong Gateway
• Surrounded by 3 bus stops
• Close by to both PIE & AYE
• Near to Canadian International School
• Near to 2 wet markets
• Near to many other amenities
• Some units even have a nice Lake View

All in all, an excellent location for a condo to be in.

And now… For our next contestant… Westmere Executive Condominium!

Total units – 280

Completed in – 1999

• 10 minutes walk to Jurong East MRT
• Close by to amenities at Jurong East Central, J Cube, etc.
• Close by to both PIE & AYE
• Near to supermarket in J Cube
• Nearest bus stop is 5 minutes walk away

A rather decent location with a slight advantage of being marginally closer to the Jurong Gateway than Parc Oasis.

The reason why I chose to compare these two projects is because of their relatively similar location and age.

After 15 years since its completion, Westmere has obtained its “private” status and is now considered as a full fledged condo.

But what we really want to observe is… How does the market view such “condominiums”?

The answer might shock you.

Here is a chart showcasing the transaction prices of Parc Oasis and Westmere EC since 2002.

Price Comparison of Parc Oasis & Westmere EC since 2002. Source: URA

Judging from the price comparisons, it is obvious that once Westmere EC attained its private status in 2009, its prices have steadily leveled and became on par with its surrounding condominiums.

I’m not sure about you…

But that’s proof enough for me to believe that the only difference between an EC and a condominium is the 10 year transition period. (and of course the HEAVILY discounted prices)

Now It’s Your Turn

Are you now on the brink of submitting your application for the latest BTO?

Or are you now seriously considering getting an EC instead?

Let me know in the comments section below!

P.S. If you have friends who are in this exact situation, share this post with them if you think they would benefit from it!

In any case, I have compiled a curated list of ECs that I personally think are great buys (with at least a $250 psf potential profit.).

Inside this list will be a price comparison between the ECs and their surrounding condominiums so that you can cherry-pick the EC with the highest price disparity!