Some property observers say imposing a resale levy on those upgrading from a HDB flat to an executive condominium (EC) could be one of the tweaks the government may make to the current EC scheme.
But they remain divided over the relevance of the current EC scheme in today’s market.
National Development Minister Khaw Boon Wan had said on Thursday that the EC scheme cannot carry on in its current form.
He pointed out a “sense of inequity” between HDB and executive condominium owners.
Mr Khaw had suggested that EC owners may make more profit than HDB flat owners in the resale market.
Executive condominiums seem to be drawing a larger profit margin for owners in absolute terms, compared to HDB flats in the resale market.
According to data from the Singapore Real Estate Exchange, a four-room flat in Choa Chu Kang was sold at a median price of S$136,000 in 2005.
But the median resale price for such a unit was more than S$420,000 last year.
In comparison, executive condominium The Quintet was priced at about S$478,333 in 2005.
The median resale price for such EC units was about S$905,000 last year.
Observers point out that the price increase in percentage terms tell a different story.
For the same four-room Choa Chu Kang HDB flat, there was a 209 per cent price increase, as compared to the 89 per cent increase for the executive condominium.
Analysts say the percentage gain should also be considered when factoring the profit made by home owners.
Currently, HDB flat owners upgrading to a new Build-To-Order flat are subject to a levy, ranging from S$15,000 for a two-room flat to S$50,000 for an executive flat.
Property observers said imposing a resale levy on HDB flat owners upgrading to an executive condominium could be one of the tweaks the government may make.
Mr Mohamed Ismail, CEO of PropNex, said: “An existing BTO flat owner, when he buys another BTO flat, he is subjected to a levy based on the existing size of a BTO flat.
“But on the other hand, an existing HDB owner, when he wants to upgrade to an executive condo, he is not subject to a levy. There again, a sense of inequity.
“The point that you can afford and the point that you are making a profit from your BTO flat, why are you not subject to a levy while an HDB upgrader is? Probably this is another area, if any form of tweaking may well take place.”
Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group also held this view of imposing a resale levy on those upgrading to an EC.
Mr Ismail added that the government could choose to get rid of all forms of grants for ECs or impose a tax on the capital gain made from selling an EC.
But he said these measures would be extreme.
According to data from the Singapore Real Estate Exchange, 135 executive condominiums have been sold on the resale market this year, fetching a median price of S$990,000, an 8 per cent increase compared to 2012.
The executive condominium scheme was re-introduced in 2010 and caters to the sandwich class in Singapore – those who do not qualify for a new HDB flat but who also cannot afford a new private property.
But just how relevant is the EC scheme in today’s context?
Observers have mixed views.
Ku Swee Yong, CEO of International Property Advisor, said: “ECs in the totality of things only cater to a fraction to the total market of 1.2 million households in Singapore.
“There are about 10,000 of them today, with another 9,000 on the way. Do we really need a scheme for just this category of people?
“Is the scheme of executive condominiums today outdated? Is it right in today’s age, given the income that’s above the median GDP per capita, that these families really need to buy taxpayer subsidised products? Are they really a sandwiched class?”
But Nicholas Mak, executive director for research & consultancy at SLP International Property Consultants, said: “Right now, the scheme does serve its purpose. There are many households out there who are aspiring to buy private condominiums but are not able to do so and actually this EC scheme is serving a large part of this sandwich class.
“But the other thing is that buyers of executive condominiums are bounded by public housing rules. So, if the government were thinking of reducing the subsidy given to EC buyers, they should likewise roll back on the public housing rules that bind EC buyers.
“But if the government were to roll back all the subsidies, that means reduce all the subsidies to nothing, then ECs would be no different from the mass market private condominiums.”
Mr Mak also suggested the government could potentially consider having the HDB, and not private developers, develop EC projects.
He said if the government were to develop EC projects, it would be able to control the price of ECs as well.
The topic of executive condominiums is set to be discussed further at other Our Singapore Conversations on housing in the next few months.
Source : CNA – 29 Apr 2013
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