Executive condo or a Prime/Plus HDB?

If you’ve only got a minute:

• Executive Condominiums (ECs) are significantly more expensive than Prime/Plus HDB BTO flats, impacting both the initial downpayment and monthly mortgage repayments.
• Key factors to consider when choosing between the 2 housing types include affordability, lifestyle preferences, eligibility and long-term plans.
• The newer Prime/Plus BTO flats come with resale implications compared to Standard BTO flats. The impact of government subsidies, clawbacks, and resale restrictions must be factored into the long-term planning.

The recent launch of the newly classified HDB Built-to-order (BTO) flats have provided more choices to home buyers in Singapore. Specifically, Plus and Prime BTO flats which are located in “choicier” locations, albeit at a slightly higher price point, were particularly welcomed, with all of them being over-subscribed in the balloting exercise.

Prime and Plus HDB BTO may appeal to singles and families who have a higher home budget and place a high priority on a convenient home location. On the other hand, Executive Condominium (EC) buyers are likely to prioritise access to private housing facilities, higher potential price growth for their home while living further away from a central location.

Executive Condo or Plus/Prime BTO?

ECs and HDB Build-to-Order (BTO) flats, including the recently launched Prime and Plus categories, are 2 popular housing options in Singapore, each catering to different needs and preferences.

While both offer affordable housing solutions, they differ significantly in terms of pricing, location and target audience. ECs, which are hybrid public-private properties, appeal to those who want a more “premium living” option with facilities such as a gym or swimming pool within a gated compound. In contrast, HDB Plus and Prime BTO flats are more affordable, generally located in a more accessible location and buyers typically receive better financial support from the government in terms of grants.

Yet, for couples or young families with a monthly income ranging from S$12,000 to S$14,000, making the choice between a new EC and a Prime/Plus HDB BTO flat might not be easy. Let us look at the advantages and drawbacks of these 2 types of housing, and the factors to weigh when making a decision.

Characteristics of ECs

Advantages:

• Higher perceived prestige and exclusivity.
• More amenities and facilities (e.g., swimming pools, gyms, etc.).
• Potential for higher capital appreciation in the long term.
• Privatisation after 10 years of ownership.
• No lease restrictions after 5-year Minimum Occupancy Period (MOP)

Disadvantages:

• Significantly higher initial purchase price. 
• At least 5% downpayment in cash, the remaining 20% can be in cash or CPF money.
• Monthly maintenance fee of at least S$200.
• Location is generally further away from central core due to the hybrid public/private nature of ECs.

Characteristics of HDB Prime & Plus BTO Flats

Advantages:

• Significantly lower initial purchase price.
• Government subsidies and grants available (depending on eligibility).
• More choices in location and flat types.

Disadvantages:

• No private amenities and facilities but there are shared public amenities.
• Stricter resale conditions with 10-year MOP and future buyers face income ceiling limits.
• Subject to subsidy clawback when re-selling flat after MOP.

Key Factors to Consider

1. Affordability
An EC will be more expensive compared to a Prime or Plus BTO. Presently, the average launch price (Nov 2024) of an EC is around S$1,500 psf according to DBS Group Research. For the launch of the first Prime flats at Crawford (Oct 2024), the psf price comes up to S$738. This means that EC prices are almost double that of a Prime HDB BTO.

Other than considering the overall purchase price, EC buyers need to be aware that they are only allowed to take up a bank loan instead of a HDB Concessionary loan. The bank loan will require at least 5% of downpayment to be made in cash. For HDB Concessionary loan, home buyers only need to pay 10% downpayment upon signing of lease and they can also pay the entire downpayment with money from their CPF-Ordinary Account.

Buying an EC also comes with higher monthly maintenance fees, ranging from around S$200 to S$400 per month, whereas an owner of a HDB 4-room flat will typically pay a monthly service and conservancy charges of around S$90.

Example of home purchase price for a couple earning S$14,000 per month

Note: This example assumes a couple earning S$14,000 monthly and is subject to Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR) limitations.
¹ A couple earning S$14,000 per month will only qualify for a loan of approximately 58% of the total purchase price for an EC, based on current MSR limits.

In the table above, we assume the price of the Prime BTO to be at S$750,000 and the EC to be at S$1.3 million, with a couple earning a total of S$14,000 per month.

Since they are buying subsidised housing, the total loan they can borrow will be subject to the tighter 30% Mortgage Servicing Ration (²MSR) limit rather than the 55% Total Debt Servicing Ratio (³TDSR). As such, even if the Loan-to-value ratio is at 75% of purchase price, they may not be able to take up a loan at the 75% LTV, based on the MSR limit.

²MSR – Borrower’s total monthly debt obligations for mortgage/ Borrower’s gross monthly income x 100% ≤ 30%

³TDSR - Borrower's total monthly debt obligations / Borrower's gross monthly income) x 100% ≤ 55%

As seen from the table, buying an EC would require the couple to come up with quite a hefty amount of close to approximately 42% of the purchase price in the initial downpayment due to the MSR that limits them from taking up a larger loan. While the monthly repayment is about S$1,000 higher than that compared to buying a Prime HDB BTO, they will be able to lower the quantum should they decide to stretch out the tenure to 30 years.

2. Lifestyle Preferences:
EC residents generally appreciate the more luxurious features and amenities often found in private properties, such as swimming pools, tennis courts or a gym. Prime or Plus HDB BTOs, while offering a more affordable entry point, prioritise convenience and community. Their locations are strategically chosen for proximity to centralised amenities and transport links. Ultimately, the ideal choice hinges on whether one prioritises premium living within a gated community, or a more budget-friendly option with potentially larger living spaces and better access to public transport.

3. Eligibility Criteria:
Since both HDB BTOs and ECs are subsidised public housing, there are certain criteria buyers need to fulfil to qualify for purchase. Buyers will need to ensure they fit the eligibility criteria before applying to buy either an EC or HDB BTO.

One key difference is that singles above 35 years old are eligible to purchase a BTO under the Single’s Scheme, but new EC buyers who are single will need to apply under the Joint Singles’ Scheme with up to 3 other singles above 35 years old. One key difference is that singles above 35 years old are eligible to purchase a BTO under the Single’s Scheme, but new EC buyers who are single will need to apply under the Joint Singles’ Scheme with up to 3 other singles above 35 years old.

Monthly income limit for HDB BTO is currently set at S$14,000 per household and S$16,000 for EC buyers.

4. Resale implications after MOP
One key difference for the resale of Prime/Plus HDB BTO flats and those of ECs is the longer MOP for the former. Prime and Plus flats’ MOP will be 10 years, and EC homeowners can sell their EC after 5 years to those who fulfil HDB eligibility requirements. After 10 years, ECs are considered privatised and can be sold on the open market, even to foreigners.

The implication of this is that the pool of buyers who can qualify to buy a resale EC is likely larger after 10 years, since buyers will not need to fulfil eligibility criteria, nor adhere to the income limit. For Prime and Plus HDB BTO, buyers will be limited by the S$14,000 income ceiling, as well as HDB eligibility criteria and 30% Mortgage Servicing Ratio (MSR) borrowing limit.

Furthermore, Prime/Plus HDB BTO flats will be subject to a subsidy clawback rate of 6 to 9% upon resale, whereas EC sellers will need to pay a resale levy of S$55,000 if the original buyers had utilised the CPF Housing Grant.

5. Potential capital appreciation and resale value
ECs may offer greater potential for price appreciation upon resale compared to BTO flats. This is partly due to recent changes in BTO regulations, such as the introduction of Prime and Plus categories, which aim to reduce the frequency of resales. According to DBS Group Research, data shows that 9 EC projects reaching their MOP in 2023 and 2024 experienced resale price increases between 60% and 90%. This translates to average gains exceeding S$500,000 for a typical 900 square feet unit.

Comparatively to HDB resale flats, if we look at the HDB Resale price index, resale HDB prices have almost doubled in the last 15 years. If we assume the same trend in the next 15 years (10-year Minimum Occupancy period + 5 years’ wait), a current 4-room Plus flat that cost S$600,000 could sell for around S$1.2 million in year 2039, assuming the same trajectory. With a subsidy clawback of 8% ($96,000), a couple can likely still make a profit of about S$500,000, excluding transaction costs.

So, while both ECs and Prime/Plus BTO prices will likely trend north in the long run, the demand and potential pool of buyers, as well as government policies will affect the rate at which both appreciates.

EC versus Prime/Plus HDB BTO

Conclusion

Choosing between an EC and a Prime/Plus HDB BTO flat requires careful consideration of several key factors. While ECs offer higher prestige, private amenities and higher potential for greater capital appreciation, they come with a significantly higher price tag, stricter financing requirements, and typically less central locations.

Prime/Plus BTO flats, on the other hand, provide a more affordable entry point with government subsidies and grants, more central locations, and a wider range of flat types.

Ultimately, the best choice depends on individual financial circumstances, lifestyle preferences and long-term goals. Buyers should carefully weigh the advantages and disadvantages of each option and a thorough assessment of these factors will enable prospective homebuyers to make an informed choice that best suits their needs and aspirations.

Financing your property

Whether you're seeking to purchase a BTO or considering a EC, ensure you make well-informed decisions regarding your home financing. Just follow these steps. It's as simple as 1, 2, 3!

Step 1: Use DBS myHome Planner to evaluate your property purchase budget.

Step 2: Secure an In-Principle Approval (IPA) to ascertain the loan amount offered by the bank.

Step 3: Utilise the Repayment Calculator to project monthly payments for more effective budgeting.

Step 4: If you would like a complimentary home loan consultation to assist in your home financing journey, fill in your contact details here and our Home Advice Specialist would reach out to you.

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Check out DBS Home Marketplace to work out the sums and find a home that meets your budget and preferences. The best part – it cuts out the guesswork.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.