Copen Grand, Tengah Town’s first executive condominium (EC), initially grabbed the headlines when it announced its launch prices in October 2022.
Prices for its two-bedroom plus study started at $1.08 million and for its five-bedroom premium at $1.88 million. Yet, despite the mouth-watering price tag, Copen Grand was fully sold within one month of its launch. In fact, first-time buyers purchased more than 70% of the 639-unit development.
This exuberant buying demand comes amid a rise in global interest rates, which has pushed local fixed home loan rates to above 4%. Even though recent cooling measures were introduced to dampen the hot HDB resale market, the prices of new executive condominiums continue to reach as high as $2 million. This raises questions over the affordability of such public housing developments.
In this article, we compute how much of a down payment—a barometer for affordability—is required when purchasing new executive condominiums, as their loan limits are different than those for HDB flats and private housing.
Read Also: Complete First-Timers’ Guide To Buying A New Executive Condominium (EC) In Singapore
Loan Eligibility Requirements For Buying Executive Condominiums
The executive condominium (EC) scheme was introduced to provide an affordable option for higher-income Singaporeans who aspire to own private housing. Because the average EC buyer is slightly more affluent than the average HDB buyer, the rules for buying and getting a loan for ECs are different from those for regular HDB flats.
#1 Income Ceiling
To qualify for the purchase of a new EC, the buyer’s monthly household income must not exceed $16,000. This is a higher limit than the one for direct HDB flat buyers, whose monthly income should not exceed $14,000 if they are a couple or $21,000 if they are buying as an extended or multi-generational family.
#2 Housing Grants
The housing grants for which EC buyers qualify are also less than what an HDB flat buyer could get. Depending on the household income, EC buyers could expect to get up to $30,000 in housing grants, compared to HDB flat buyers, who could get up to $80,000 in enhanced housing grants (EHG).
Source: HDB – Family Grants Available to First-time EC buyers
Read Also: Guide To Housing Grants For First-timers
#3 Loan Limit
Buyers of ECs are only able to get home loan financing from one of the financial institutions. Unlike HDB flats, ECs do not qualify for housing loans from HDB.
As a result, EC buyers can only borrow up to 75% of the property’s value due to the loan-to-value (LTV) limit, which is similar to private housing. Additionally, EC buyers would need to pay a minimum of 5% in cash for their down payment. On the other hand, HDB buyers can borrow up to 80% of the property’s value with HDB housing loans and could use either cash or CPF to pay for the down payment.
New EC buyers are also subjected to the same mortgage servicing ratio (MSR) cap of 30% like HDB flat buyers. The ratio limits the portion of an EC buyer’s gross monthly income that goes towards paying the home loan. This is much lower than the 55% cap that is used for private housing buyers under the Total Debt Servicing Ratio (TDSR) rules.
| New Executive Condominiums | HDB Flats | Private Properties | |
| Borrower’s monthly income ceiling | $16,000 | $14,000 for couples or $21,000 for multi-gen families | No Limit |
| Borrower’s loan servicing ratio limit | MSR – 30% | MSR – 30% | TDSR – 55% |
| Loan To Value | 75% | 80% | 75% |
| Minimum cash payment | 5% | 5% cash or CPF OA Savings | 5% |
Down Payment Needed For New Executive Condominiums
The table below indicates the maximum loan amount based on the loan limits for EC buyers based on a MSR of 30%. The calculation factors for the stamp duty and miscellaneous fees.
| Monthly Household Income | Loan Amount Per Tenure | |||
| 30 Years | 25 Years | 20 Years | 15 Years | |
| $10,000 | $628,383 | $568,357 | $495,065 | $405,576 |
| $10,500 | $659,802 | $596,775 | $519,818 | $428,855 |
| $11,000 | $691,222 | $625,193 | $544,572 | $446,134 |
| $11,500 | $722,641 | $653,611 | $569,325 | $466,412 |
| $12,000 | $754,060 | $682,028 | $594,078 | $486,691 |
| $12,500 | $785,479 | $710,446 | $618,831 | $506,970 |
| $13,000 | $816,898 | $738,864 | $643,585 | $527,249 |
| $13,500 | $848,813 | $767,282 | $668,338 | $547,528 |
| $14,000 | $879,737 | $795,700 | $693,091 | $567,807 |
| $14,500 | $911,156 | $824,118 | $717,845 | $588,085 |
| $15,000 | $942,575 | $852,536 | $742,598 | $608,364 |
| $15,500 | $973,994 | $880,954 | $767,351 | $628,643 |
| $16,000 | $1,005,413 | $909,371 | $792,104 | $648,922 |
Based on the table, this gives us a maximum purchase price of $1,340,551 and a down payment of $335,137 for an EC buyer with a monthly household income of $16,000 and a loan tenure of 30 years.
Here is how much down payment you would need for the recent EC launches in 2022 based on the maximum loan of $1,005,413.
| North Gaia | ||
| Property Types | Starting Price | (Min) Down Payment |
| 3 Bedroom | $1,140,000 | $319,200 |
| 4 Bedroom | $1,608,000 | $602,586 |
| 5 Bedroom | $1,974,000 | $968,586 |
| Copen Grand | ||
| Property Types | Starting Price | (Min) Down Payment |
| 2 Bedroom + Study | $1,080,000 | $302,400 |
| 4 Bedroom Deluxe | $1,480,000 | $474,586 |
| 5 Bedroom Premium | $1,880,000 | $874,586 |
| Tenet | ||
| Property Types | Starting Price | (Min) Down Payment |
| 3 Bedroom + Study | $1,098,000 | $307,440 |
| 4 Bedroom Deluxe | $1,438,000 | $432,586 |
| 5 Bedroom Premium + Study | $2,078,000 | $1,072,586 |
Read Also: Tenet – How This Executive Condominium (EC) Showcases What Public Housing In Singapore Can Be
The minimum down payment required for some of the bigger units is higher than the typical 25% ratio for a 75% LTV limit. This just means that EC buyers have to pay a larger down payment upfront since the maximum loan amount might not be enough for the housing purchase.
In fact, the down payment might be even higher if we add 3% to the purchase price when buying under the deferred payment scheme (DPS). EC buyers who use the DPS may begin paying their monthly mortgages only after getting the keys rather than at the time of purchase.
What Higher Down Payment Means For Property Investments?
Paying more of the property’s value upfront is usually seen as a more conservative move, as you would be reducing your loan amount. But this is not the case with the current EC prices. New EC buyers would have to stretch their full loan limits and pay more than the 25% down payment to be able to afford these price levels.
Given the high down payment sum, it is likely that young first-time buyers will need to tap into alternative funding sources, which in some cases could be their parents, to cover the excess down payment. This might give a false sense of one’s affordability for the EC they could buy, which in turn leads to further overpricing of such homes.
Therefore, it is better to stay prudent and avoid stretching your finances by buying a home that is within your financial means.
Read Also: 3-3-5 Rule Of Buying An HDB Flat: How Much Can Singaporeans Really Afford?
The post How Much Down Payment You Have To Pay To Buy An Executive Condominium appeared first on DollarsAndSense.sg.
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