The government’s revision of the executive condominium (EC) scheme will see developers being more mindful of a buyer’s income ceiling and the project’s affordability.
“Affordability of ECs will be hit by the new mortgage servicing ratio (MSR) which is capped at 30 percent of the buyer’s gross monthly income (previously, this only applied to HDB BTO and resale flats),” said Mohamed Ismail, CEO of PropNex Realty.
Coupled with the resale levy that second-time buyers will have to fork out when acquiring EC units directly from developers, both measures will “work in tandem to equalise the playing field between public housing and ECs — and will prompt developers to adjust their land bid prices accordingly”, to take into account the purchasing power of potential buyers.
“Subsequent EC land bids will be keenly watched to see if the new measures will bring down the number of bids per site and/or affect the quantum of the winning bids, given the strong offers for recent state tenders and the continued healthy take-up rate for ECs.”
Meanwhile, the implementation of the MSR for ECs will result in a 50 percent drop on a buyer’s purchasing power, severely denting the aspirations of upgraders.
It will also drive potential EC buyers into the mass market segment where the more ‘rational’ TDSR rule applies for mortgage loans, Ismail noted.
And while the EC segment has seen strong interest from developers, any new policies or schemes involving the segment should not be applied retroactively as developers may have already bid for land sites at high costs and some may have already planned out their designs and architecture based on the previous regulation of a unit size of not more than 150 sq m, he explained.
“Imposing the MSR at 30 percent for existing ECs (that are currently available for sale) will make these existing units almost unreachable as the quantum loan required is much higher.”
As such developers may build smaller units to keep the overall quantum affordable for buyers, which could compromise living space.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories email romesh@propertyguru.com.sg
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