Just last week, our Minister for National Development, Khaw Boon Wan mentioned that “There is this sense of inequity here that the lower-income group is getting lower subsidies than somebody who is earning S$12,000, so something is wrong somewhere and therefore I think we cannot carry on the EC in this current mode.”

He was, of course, talking about Singapore’s Executive Condominium (EC) scheme, a hybrid of public and private property that has caused quite a bit of controversy in recent years. It was conceived as a bridging step between public housing and private property, for families who felt that they should grow beyond their Housing and Development Board (HDB) apartments, but had no other choice except super-expensive private condominiums.

So the government stepped in, subsidising private developers to build fully-fitted condominium developments, but placing restrictions on the purchase and sale of these ECs.

For example, ECs have an income ceiling when buying new (that is, directly from the developer), just like normal HDB apartments. But this ceiling is set higher, at SGD12,000. Also, only family nucleus households with at least one Singapore Citizen are eligible.* A HDB grant is also available to such buyers, with similar restrictions as the grant given to normal HDB buyers.

It is after the five-year Minimum Occupation Period (MOP) that things get interesting for EC owners. At that point, they are allowed to sell their EC, with almost no restrictions except that only Singaporean Citizens and Permanent Residents (PR) are allowed to buy resale ECs. No grants are available to buyers of resale ECs as well. In effect, it becomes just like a private condominium, but only sold to citizens and PRs.

After ten years, even these restrictions are lifted, which means foreigners and corporate entities can purchase resale ECs that have been around for more than ten years. At this point, it is just like any other leasehold private condominium.

So what is the issue here?

Firstly, the gradual conversion from public housing roots to a full-fledged private property gives ECs a much more profit-oriented feature than just providing a stepping stone for the “sandwich” class trying to upgrade from HDB units to private property. The initial subsidy provided in terms of grants and lower prices for land sales allows buyers to make extreme profit once the five or ten years are up. In other words, the scheme subsidises people who likely will already see a hefty profit when they sell, due to the lifting of all public housing restrictions in ten years.

The other issue is that lately, developers have started flexing their creative muscle, and ECs have become more and more upscale. This has resulted in some EC units coming with SGD2,000,000 price tags. But despite these price tags, they are still well below the current market rate for such luxurious units. Despite these developers adding all the bells and whistles, they cannot charge too high a price tag even for penthouse suites, because of the income ceiling. So, a combination of massive, luxurious suites and suppressed pricing leads to the odd situation of multi-million dollar ECs being subsidised more than standard HDB units! This goes against the very goal of public housing, which is to provide for the less fortunate and struggling working class in society.

While the second issue was promptly addressed by a ruling that restricts the raw size of new EC units, we can’t help but feel a more comprehensive solution is needed. Totally scrapping the EC scheme might be a too much of an overkill, but something must definitely be done.

At BLUTA, we believe the first step should be to minimise the profiteering on public accounts. ECs should never be allowed to mature into fully privatised property. That would entail restrictions similar to HDB resale flats throughout an EC development’s lifespan. Thus, ECs can still serve to fill the gap between general public housing and private property, while keeping their status as public housing, meant for citizens only. (We realise that permanent residents can own HDB resale units currently, but that’s a story for another day.)

Another thing to consider is the grant for buying of new ECs. With the land already subsidised for developers, is there reason for providing an additional HDB grant on top of that? Some thought should be given to removing this grant, which could be an incentive for developers to raise their initial asking prices too, thus negating any benefit.

What do you think? Do you have an opinion or idea for dealing with the EC dilemma? Please let us know by commenting below, or on our FacebookTwitter, and Google+ pages.

*Data may be out-of-date. As of this writing, the page on HDB InfoWEB detailing eligibility for buying new ECs has been taken offline. A technical glitch, maintenance issue, or is something already in motion? Your guess is as good as ours right now…

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  One Response to “The Issue with Executive Condos”

  1.  

    They should allow singaporeans to purchase ECs, private condos, landed properties at 50% discount from market value so that singaporeans can stay in better housing compare to foreigners. Currently, locals are staying in poor housing while foreigners are staying in posh housing but locals have to defend the country to their last breath whereas foreigners can pack and go.

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