HDB ECs are a great choice for middle-class families as they are cheaper than private condos, are free of Additional Buyers’ Stamp Duty (ABSD) and are a good value for money. If you are wondering if you should consider buying one, here are a few things you should know about ECs.
They are cheaper than private condos
While it is true that EC are cheaper than private condos, they are not always in the best locations. They also offer a higher standard of living than HDB flats. Whether or not you choose EC depends on your needs and financial situation. If you are on a tight budget, it might be a better choice to go for a private condo.
ECs are less expensive than private condos in Singapore. The price per square foot is comparable to that of private condos, and the average rental yield is about the same. As such, an EC can easily pay for itself in a year, as the monthly rent is only $500.
While ECs are still cheaper than private condos, they can become a profitable investment. After five years of MOP, they can appreciate by up to 30 per cent. As such, ECs are a great option for people looking to move up from HDB flats. In addition, they can have good resale capital appreciation after privatisation.
They do not incur Additional Buyers’ Stamp Duty
The ABSD is a tax on residential properties that is imposed on foreigners who are not Singaporeans. Foreigners who are FTA members are exempt from paying ABSD for their first residential property and thereafter can enjoy a reduced ABSD rate. FTA members are the citizens of Iceland, Liechtenstein, Norway, Switzerland, and the United States of America.
ABSD is based on the value of the property and the price paid. The rate varies depending on the buyer’s nationality and residency. Singaporeans pay lower ABSD rates than Singapore Permanent Residents and foreigners. However, if you are an existing Singapore resident and have already purchased one residential property, you will have to pay Additional Buyers’ Stamp Duty (ABSD).
The EC purchase scheme is designed to meet the needs of “sandwich” class of households whose household income is above the HDB BTO ceiling but are not quite ready to purchase private condominiums. These individuals typically buy resale HDB flats.
They are a good value buy
Executive condominiums (ECs) are designed for self-stayers. They are priced lower than private condominiums but have condo-like amenities. According to former National Development Minister Khaw Boon Wan, an EC is like a Lexus but is cheaper. For the first 10 years, the EC is a HDB property. This means that it is subject to HDB rules, such as the 5-year MOP rule and a resale levy.
The initial interest rates are lower, but buyers need to pay a higher down payment. Also, they can borrow only 75% of the total purchase price. This means that they need to earn more than the average and have CPF savings. However, this maximum is theoretical and borrowers may not be able to borrow more than that due to their Total Debt Servicing Ratio (TDSR).
There are many benefits to owning an EC. The price is lower than a private condo, and there are no maintenance fees. It also has a minimum 5 year occupancy period. This means that owners can’t rent out their entire flat before the 5-year period is over.