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HDB flat, EC or condo? What Singapore couples need to know before deciding

From eligibility and financing, here's a comparison between HDB flats, executive condominiums and private condominium for Singapore couples shopping for their homes.
 

 

If you are house-shopping now and can only afford to get a new HDB BTO, then you obviously don’t have much of a choice. But if you still have time to save up and are considering an executive condo (EC) or private condo instead, then things can get a little tricky.

Apart from them being public or private, leasehold or freehold, there are quite a few key differences in terms of eligibility and financing. Here’s a helpful comparison of the 3 apartment housing types.

Contents

1. Overview of HDB flats vs ECs vs private condominiums
2. HDB flats
3. Executive condominiums (ECs) 
4. Private condominiums 
 

HDB flat vs executive condo (EC) vs private condo in Singapore (2019)

 
HDB flats
Executive
condominiums
(EC)
Private
condominiums
Price
$
$$
$$$
Lease
99 years
99 years
99 years to freehold
Public or
private
Public
Considered
private after
10 years 
Private
Minimum
occupancy
period
(MOP)
5 years
5 years
None
Income
ceiling
$6,000
to
$12,000
$14,000
None
CPF
housing
grants
Eligible
Eligible
Not eligible
Mortgage
HDB or
bank loan, 
MSR &
TDSR
apply
Bank loan
only, MSR &
TDSR apply
Bank loan
only, TDSR
applies
Who can
buy
Must be
eligible
to apply
under
HDB’s
BTO
schemes
Must be
eligible to
apply under
HDB’s EC
schemes
Anyone

 

Getting a new HDB flat is the cheapest housing option in Singapore.

Although you don’t have to be like, in extreme poverty or anything, there are nonetheless quite a few hoops you need to jump through in order to be eligible. Think strict eligibility schemes, low income ceilings, and etc.

Up one tier are the executive condominiums (ECs), which are “sandwich” flats that cater to the middle class — those who are “too rich” to apply for public housing, but still can’t quite afford a private home.

The main appeal of ECs lies in that after 10 years, it magically gets upgraded to “private” status.

The fanciest of apartments are of course, the private condominiums. There’s not much to say about this one, because it’s basically just a private home.

As long as you have money, you can pretty much do as you please. You can choose to buy it for investment purposes, to live there or to rent out — the authorities couldn’t care less.

So which of the 3 should you choose?

 

HDB flats — cheapest option, great as a first home

As mentioned above, most Singaporeans simply buy BTO or resale HDB flats because it’s the most affordable option — and not just in terms of the price, but also when it comes to financing your mortgage.

Buying a HDB flat

 

Pros Cons
Most affordable housing option
Low income ceiling of $6,000 to $18,000
Eligible for CPF housing grants
Must qualify under one of the HDB
eligibility schemes
Can choose between HDB and bank loans
5-year MOP applies
Lower down payment (for HDB loan)
 

 

The biggest difference between HDB and bank loans is the Loan to Value limit (LTV). Although bank loans may look “cheaper” because of the lower interest rates, for HDB loans, you only need to cough up 10% downpayment (as opposed to 25% if you took a bank loan).  For a 6-digit purchase, it’s definitely significant.
 

You have a choice between HDB vs bank loan.

Aside from the price (which can be as cheap as $200,000+ for a 3-room flat), this is the only option that allows you to take a HDB concessionary loan.

The biggest difference between HDB and bank loans is the Loan to Value limit (LTV). Although bank loans may look “cheaper” because of the lower interest rates, for HDB loans, you only need to cough up 10% downpayment (as opposed to 25% if you took a bank loan).  For a 6-digit purchase, it’s definitely significant.

 

Plus, you’ll be eligible for CPF housing grants.

If you get a HDB, you’ll also be able to take advantage of the CPF housing grants available. Assuming you’re eligible for multiple grants, you can stack the subsidies as well.

For example, if you and your spouse are both first-timers getting a flat in a non-mature estate (4-room or smaller), you may qualify for both the additional CPF housing grant (AHG) and the special CPF housing grant (SHG). Each is capped at $40,000, making it a total possible subsidy of up to $80,000.

 

However, there is a low income ceiling of $6,000 to $18,000.

Because it is subsidised public housing, you obviously won’t qualify if you’re rolling in riches. The HDB income ceiling is $6,000 or $12,000 for 3-room flats (depending on development), $12,000 for 4-room flats and $18,000 for 3-Generation units.

This is fine if you’re a 20-something couple with an entry level salary. But if you’re older and more advanced in your career, then $6,000 may be difficult.

 

And you must qualify under any one of the HDB eligibility schemes.

Another thing to note is that unlike private housing — which you can buy as long as you have money — you need to form the “right” kind of family to be eligible.

The most common one is the fiancé/fiancée scheme, whereby you apply with your spouse-to-be. Next is the public scheme, where families (parents, spouse, siblings and/or children) are eligible.

And then there are “special case” ones for orphans, single Singapore citizens, and joint-singles applicants.

 

Also, there is a 5-year minimum occupancy period.

If you’re thinking of gaming the system by getting a new flat even though you don’t intend to live there (maybe you’re intending to move in with your in-laws or something), then sorry to break it to you — no can do.

There is a minimum occupancy period of 5 years, which means that for 5 years, you must live in the flat. You can rent out a room or two, but not the entire apartment.

For more information on getting a HDB flat, here are 2 useful articles for further reading:

Everything you need to know about getting your first BTO flat

HDB BTO & Resale Eligibility – The Singles Singapore Citizen & Joint Singles Scheme

 

Executive condo (EC) — best for the “sandwich class”, eventually becomes private

Unlike HDB flats, ECs are built by private developers with all the frills of a private condo, but are first sold as public housing via HDB. This property type is a public-private hybrid that is public for the first 10 years, and private thereafter.

Buying an executive condominium

 

Pros Cons
25% to 35% cheaper than private condos
Income ceiling of $14,000
Eligible for CPF housing grants
Must qualify under one of the HDB eligibility schemes
Has the premium facade and
facilities of a private condo
Not eligible for HDB loan, so you must pay at
least 25% down payment in cash/CPF
Considered private after 10  years
5-year MOP applies

 

They’re up to 35% cheaper than “real” condominiums, but are usually at the more “ulu” parts of Singapore, which can be hard if you don’t own a car.

 

ECs are made for the “sandwich class”, with an income ceiling of $14,000.

The income ceiling for new HDB flats is currently $12,000 (it’s only $18,000 for 3G units), while the income ceiling for ECs is $14,000.

For people whose combined household income is $12,001 or $13,999, the only ways you can get your hands on a new home are to purchase an EC or buy a unit in a private development. The latter is obviously much more expensive, which makes ECs look attractive in comparison.

Of course, you’re still free to buy resale property on the public and private market. But some 4- and 5-room HDB resale flats (especially those in prime areas) can get really pricey too.

 

Cheaper than a “real” condo, and eligible for CPF housing grants.

As ECs start out under the HDB umbrella, you are still eligible for CPF housing grants — assuming your income is low enough while still enabling you to afford the EC.

First-time applicants who are Singapore citizens and applying as a couple can get between $10,000 to $30,000 worth of CPF housing grants if their combined incomes are $12,000 and below.

Of course, another key draw is that ECs are usually priced significantly lower than full-fledged condos, but include all of the same facilities like swimming pools, gyms and etc.

 

The reselling rules change when ECs become private after 10 years.

The greatest draw of ECs is surely the fact that while they start out as HDB property, in 10 years’ time they will be officially recognised as private property.

This is where ECs differ the most in value as compared to BTO flats. Other than the bragging rights you’ll have for finally becoming a private homeowner, your flat could become a better investment, because you’ll no longer be bound by HDB restrictions on selling.

From their 6th to 10th years, ECs are sold like regular resale flats; only Singaporeans and Permanent Residents (PRs) can buy them. But from the 11th year, ECs go “fully private”. They can then be sold to foreigners and companies. This is a big deal, because it opens up the range of prospective buyers.

The downside is that, when buying resale ECs after the 11th year, buyers can no longer get housing grants for them. They are well and truly private property by then.

 

However, you’ll have to arrange for your own bank loan.

Whether it’s better to take out an HDB loan or a bank loan is debatable, especially if you actually care about how much interest you’ll be paying.

But with ECs there is no such option. The thing about bank loans is that while you might enjoy lower initial interest rates, you have to fork out more for the downpayment and/or cash/CPF portion, since you can only borrow a maximum of 75% as opposed to 90% for HDB loans.

So aside from an above-average income, you really do need to have quite a bit of cash/CPF savings to cough up the downpayment.

Note that 75% is the theoretical maximum, but if you already have other loans like car loans and whatnot, you might not even be allowed to borrow that much thanks to the Total Debt Servicing Ratio (TSDR).

Not forgetting the Mortgage Servicing Ratio (MSR) of 30%, which is the percentage of your salary that you can use for your home loan repayment.

 

The 5-year minimum occupancy period (MOP) applies, too.

For ECs, there is a minimum occupancy period too. So just like with HDB flats, you’re not allowed to rent it out (not the entire apartment at least) during the first 5 years.

For more on how to apply for an EC, read our step-by-step guide to buying an EC.

Back to top

 

Private condo — the “best” option, but only if you can afford it

Despite all that talk about the 5 Cs no longer being important, in actual fact the only C that’s died is the country club. Everything else is still very much alive in the hearts and minds of Singaporeans… Which is why private condominiums are still as popular as they are today.

Buying a private condominium

 

Pros Cons
No income ceiling
The most expensive option
No 5-year MOP, so you can rent out anytime
Not eligible for CPF housing grants
Anyone can buy, no restrictions on owning multiple
properties
Not eligible for HDB loan, so you must pay at least 25% down payment in cash/CPF

 

It’s the most prestigious — if you’re the kind to care about “face” and status — and the most expensive. You’ll get little help financing it.

 

No MOP, and no restrictions on property ownership

HDBs and ECs have a minimum occupancy period (MOP) of 5 years during which you need to live in the property and cannot rent it out. There’s no such thing for private homes.

Also, there’s no restriction on property ownership. For HDB flats and ECs, you must not have owned or disposed of any other property within the last 30 months of your purchase.

As long as you have the moolah, you can buy as many condo units as you want, whether to live in, rent out, or just leave empty.

 

There are also more options in terms of location and lease.

There are 2 main differences between ECs and private condos. Firstly, all ECs have a 99-year lease, but private condos can be 99-year, 999-year or even freehold.

That will make a difference if you intend to live there long-term, and if you want to pass it down to your children next time.

Secondly, ECs are usually located at “ulu” locations that aren’t near the MRT or bus interchanges — think Sengkang, Sembawang, Punggol and the likes.

Private condos, on the other hand, can be located anywhere. But of course, the price will increase accordingly lah. The more prime it is, the more you will have to pay.

 

However, for private condos, you can only take a bank loan.

As with ECs, you can only apply for bank loans to help pay for a private condo. This is true for all private properties, including landed houses.

The LTV is 25% cash/CPF and 75% loan, and you have to pay at least 5% in cold, hard cash. That’s a huge sum considering condos these days often cost above $1 million, so this isn’t to be taken lightly.

Banks are also known to be a lot less lenient than HDB, so don’t expect any mercy if you run into any unexpected financial issues and have problems with repayment.

 

There are also no CPF housing grants for private housing.

As expected, private housing purchases are not eligible for any housing subsidies. Zero. None. Zilch.

You are expected to be rich enough to pay for everything on your own, so make sure you budget properly and can really afford to pay off your mortgage.

 

This article was originally published on MoneySmart.

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