BTO Vs. EC, which one should you choose as your first home?
Before we jump into this topic, let us look at what BTO and EC are.
Build-To-Order (BTO)
Build to order (BTO) flats are constructed by Housing and Development Board. It is usually the first home for any Singaporeans as it is heavily subsidies by the government which make it affordable especially for the newlyweds.
Executive Condominium (EC)
On the other hand, Executive Condominium (EC) are a “hybrid public-private housing” built by private developers but are first sold as a public housing. What this mean is that it has the premium façade and facilities of a private condo. E.g Swimming pool, Gym, BBQ Pit, 24/7 Security etc. While it is still considered a public housing, this also mean that an EC owner will have to fulfil the 5-years Minimum Occupation Period (MOP), before they can sell to another Singapore Citizen or Permanent Residence. A great bonus about EC is that it will be “fully privatised” after 10-years. In essence, this means that the public housing title will be remove and replaced with private property, which can now be sold to anybody including a foreigner. EC are considered a type of subsidies housing as it is usually priced at a fraction of a private condominium. However, there are many restrictions when buying an EC and not everyone can qualify for the purchase. Few of the many restrictions are an income ceiling of S$16,000, and the buyers must qualify under one of HDB eligibility schemes.
To compare the 2 properties, let us first look at some of the qualities of BTOs and ECs.
Financing
1. BTO
Taking 3 bedrooms unit in the North as a comparison:
According to the Feb 2020 BTO sales launches – – Canberra Vista (Sembawang) A 4-Room HDB (3 Bedrooms) – S$300,000
Breakdown of financing a BTO using bank loan: (Take note that grant are not taken into calculation, actual amount could be lower with grants) 5% Cash = S$15,000 20% CPF = S$60,000 Buyer’s Stamp Duty = S$4,200 (Via CPF/Cash) Total upfront payment = S$79,200 Monthly Instalment = S$809 (Based on 75% loan, 30 years tenure, 1.8% interest rate)
2. EC
According to developer price chart for EC – Parc Canberra 3-Bedrooms Unit – $900,000 Breakdown of financing an EC using bank loan: (Take note that grant are not taken into calculation, actual amount could be lower with grants) 5% Cash = S$45,000 20% CPF = S$180,000 Buyer’s Stamp Duty = S$21,600 (Via CPF/Cash) Total Upfront Payment = S$246,600 Monthly Instalment = S$2,428 (Based on 75% loan, 30 years tenure, 1.8% interest rate) Based on a Mortgage Servicing Ratio (MSR) which put a capped amount on the amount that may be spent on mortgage repayments to 30% of a borrower’s gross monthly income. The estimated combined income needed for each purchase for the above example will be as follow: HDB: S$2,700 EC: S$8,100
Looking at these figures, we can tell that BTO flats are waaaay more affordable as compared to EC. So, if financing is an issue for you (and most of us), then BTO flats are the way to go!
Capital Appreciation
As mentioned previously, EC will only be fully privatised after 10 years. So, let us use 10 years as the benchmark for capital appreciation. Look at the following graph:
From the graph above, we can see the appreciation of HDB flats for the past 10 years is 16.3% while EC appreciate an impressive 50%!
The sales proceed from the HDB and EC would roughly be:
HDB: S$44,336
EC: $465,000
We can see that EC as a starter home is a clear winner if you can afford it. The appreciation is much higher as compared to a BTO flat. With profit over S$400,000, one could easily dispose the EC after 10 years and upgrade to a private housing.
In summary…
From the graph above, we can see the appreciation of HDB flats for the past 10 years is 16.3% while EC appreciate an impressive 50%!
The sales proceed from the HDB and EC would roughly be:
HDB: S$44,336
EC: $465,000
We can see that EC as a starter home is a clear winner if you can afford it. The appreciation is much higher as compared to a BTO flat. With profit over S$400,000, one could easily dispose the EC after 10 years and upgrade to a private housing.
In summary, there are no right or wrong answer when choosing between a BTO Flat or an EC.
If you have the financial capability to purchase an EC, please go for it! The capital appreciation would give you a good profit in future which would make it much easier when you want to upgrade to a private property. However, if financing is an issue or if you do not want to be financially stretched, a BTO flat would be the better choice. After all, you can always upgrade to an EC or even a private property later when you have the financial capability to do so. Many Singaporeans buy BTO flat as their first home. This way, they can save some money upfront while setting aside funds over the next decade. When the time is right, they sell their BTO flat, then combining the sales proceed together with the savings to get a private property.
