For those Singaporeans who are scouting for a house there are a few type of housings that they can consider i.e. a new Build to Order (BTO) flat from the Housing and Development Board (HDB), Executive Condominium (EC) or private condominiums. Other that being either a private or public housing, the tenure of the dwelling that are some major differences when it comes to financing and eligibility conditions for purchasing. Below are the comparison and differences of the 3 different types of housings.
Differences between HDB Flats, Executive Condominiums and Private Condominiums 2019
|HDB Flats||Executive Condominium||Private Condominium|
|Tenure||99 years||99 years||60 years to Freehold|
|Type of Housing||Public||Partial Privatised after 5 years and fully privatised after 10 years||Private|
|Minimum Occupancy Period (MOP) of 5 years||Applicable||Applicable||Not Applicable|
|Income Ceiling||$7,000 for single|
$14,000 for household
|$16,000 for household||Not Applicable|
|Housing Grants||Eligible||Eligible||Not Eligible|
|Mortgage||HDB Loan or Bank Loan||Bank Loan||Bank Loan|
|Loan Limitation||Mortgage Service Ratio (MSR) and Total Debt Servicing Ratio (TDSR) Applicable||Mortgage Service Ratio (MSR) and Total Debt Servicing Ratio (TDSR) Applicable||Total Debt Servicing Ratio (TDSR) Applicable|
|Who are eligible to purchase?||Eligible under HDB’s schemes||Eligible under EC’s schemes||Anybody|
A public flat from the HDB might be the cheapest option when it comes to housing but there are a few criteria that a buyer must pass before they are eligible to buy such as the stringent regulations on the income ceilings, the eligibility schemes and etc.
Up the next level will be the Executive Condominium which are housings that are catered to the in between group i.e. those whose income levels are above to apply for a HDB flat but a private housing will still beyond their affordability range. The main alluring factor of ECs is that their status will turn to partially privatized after 5 years and becoming fully private housings after 10 years.
The last type of housing will be the private dwellings. These homes are basically private housings without any much restriction. By purchasing a private housing, the buyers can choose for self-stay or rent it out without much regulation.
So which of these 3 types are more suitable?
As highlighted above, a HDB flat will be one of the most affordable choices in the market in terms of pricing and as well as the financing of the mortgage loan.
Below are the benefits and limitations of getting a HDB flat
|High affordable option of housing||Income not exceeding between $7,000 to $21,000|
|Can apply for CPF housing grants||Must pass one the eligibility schemes in order to purchase|
|Choice between using HDB loan or bank loan||MOP of 5 years applicable|
|Down payment is lower when using HDB loan|
For purchasers of HDB flat, they can select between HDB or bank loan
Other than the affordable pricing which can go below $100,000 for a 2 room-flexi flat, the HDB flat is the only type of housing which allow buyers to use the HDB concessionary loan.
The biggest distinction between the HDB concessionary loan and the bank loan will be the Loan to Value (LTV) limits. Though bank might offer lower and more attractive interest rates than HDB loan, there is a benefit of getting HDB loan. The LTV for HDB loan is 90% which means the down payment when it comes to using a HDB loan will be only 10% as comparing to the 75% LTV for bank loan which implies a 25% down payment is needed.
Purchasers will be eligible for CPF housing grants
Those getting a HDB flat will also be able to take the available CPF housing grants that are applicable. For those eligible for multiple grants, they will be able to stack up the government subsidies.
For instance, those married couples which are first timers for buying a HDB flat that is 4 room flat or smaller in non-mature estates will be eligible for the Enhanced CPF Housing Grant with a maximum subsidiary up to $80,000. This grant has replaced the previous Special CPF Housing Grant as well as the Additional CPF Housing Grant with effect from 11th September 2019.
However, there are caps on the income level of $7,000 to $14,000
As a HDB flat is a subsidized public home, it will not be a privilege for the wealthy buyers. The income ceiling by HDB will be $7,000 or $14,000 on the 3-room flat which will also depend on the development. For 4-room flats the income ceiling will be $14,000 and for 3-Generation flats it will be $21,000.
For young couples, it will be not much difficulty for them with their entry level salaries. However, hose mature buyers who have long been in the work force might likely to exceed the income ceiling set.
Do take note also that the income ceiling is not applicable for resale HDB flats in the open market. It is only applicable for those who wish to get their CPF housing grants and/or wanted to get the HDB concessionary loan.
To buy a HDB flat, purchasers must fall under one of the eligibility schemes
Buying a public housing, be it from directly HDB or the resale market is not like private homes which one can buy so long he or she has the money. To acquire a HDB flat there must be a valid “family nucleus” in order to be eligible.
For most buyers of HDB flats, they will purchase under the fiancé/fiancée scheme where one will apply with their wife or husband to be. The next most common scheme will be the public scheme for families that make up of spouse, parent, children and/or siblings.
There are also “special cases” for single Singaporean or 2 singles Singaporeans together as well as orphans that are eligible for HDB flats.
Take note, there will be a MOP of 5 years
For those who think of getting a HDB flat without the intention of living there and using it as an investment vehicle to collect rental, there will be a time period and certain regulations to be adhere to.
There is a 5 years MOP to follow. This means that within 5 years from the day the keys are collected, owners will have to stay in the flat for that time frame. During this period, they can only rent out their rooms but not the entire flat. Owners are also unable to sell off their flats even though there is a good offer and during this period, they are also not able to acquire any private homes.
Executive Condominium – Ideal for the “in-between class” which privatized eventually
ECs are constructed by private developers as compared to HDB flats. They also provide the facilities and amenities of what a private condominium development will but is sold by HDB as public homes. This type of development is a hybrid of public-private housing that follows the rules and regulations of the public housing in the initial 10 years and will become fully privatised thereafter.
You May Want to Check Out Some of These ECs
Benefits and Limitations of Executive Condominium
|25% – 35% lower than private condominiums||Income ceiling up to $16,000|
|Can apply for CPF housing grants||Must pass one the eligibility schemes in order to purchase|
|Offers the facilities that are available in private condominiums||Down payment will be 25%, with 5% in cash and 20% in cash/CPF as HDB loan is not applicable|
|Partial privatised after 5 years;|
Fully privatised after 10 years
|MOP of 5 years applicable|
The prices of Executive Condominium units can be up to 35% cheaper that the private condominium units but they are usually situated in the areas that are of less amenities and accessibilities. Some of them are also not commuting friendly.
ECs are built for those “in-between class” and an income ceiling is applicable
The HDB flats have an income ceiling as of current at $14,000 (the 3G units will be $21,000), while for ECs the income ceiling will be $16,000.
For those with monthly household income that is more than $14,000 but less or equal to $16,000, their choices of homes will be either an EC unit or a private home. In terms of pricing, the Executive Condominium seems to be more alluring as compared to private housings.
For those in this bracket can still buy a HDB resale flat in the open market but some of these bigger size public housings such as the 4 room and 5 room flat can be pricey as well especially in prime locations.
Lower price as compared to condominium and also can apply for CPF housing grant
As the ECs fall under the rules and regulation of HDB, purchasers are still eligible for the CPF housing grants depending on the purchasers’ income level and also making the EC for affordable.
For Singapore Citizens who are 1st time applicants and applying under as husband and wife or fiancé and fiancée, they are eligible for CPF housing grants ranging from $10,000 up to $30,000 if their monthly household incomes are $12,000 or less.
And certainly, another major attraction of Executive Condominium is that their prices are usually significantly more affordable than private condominiums but comes with the range of facilities such as gyms, swimming pools and etc.
The regulations of reselling change after the ECs turn private from their 10th years onwards
The biggest draw for ECs is for sure the fact that although they begin as a public housing, after their 10th years they will officially be turned into private property status.
This is what ECs set themselves apart from HDB flats in turns of value. Other than that they need not to adhere to the strict rules and regulations by HDB, the apartments will yield better return in terms of investment as the restrictions set by HDB are also lifted.
After their 5th year and within the 10th years, owners of Executive Condominium can only sell to Singaporeans and Singapore Permanent Residents but these buyers unlike resale HDB flats do not need any fall under and HDB eligible schemes to be qualify to purchase.
The incoming owner also need not abide to the 5 years MOP before they can rent out the whole unit or sell off their unit. The only thing to look out is that the buyers till need to be Singaporeans or Singapore Permanent Residents if the EC unit is still within 10 years.
After the 10th years, the ECs will be fully privatised. From this moment onwards, they could be bought over by companies and foreigners and this will open up to a wider range of potential buyers.
Executive Condominium can only be finance by bank loan
The point of whether acquiring a bank loan or a HDB loan is better is debatable particularly for those whom care on the amount of interest that will be payable. But for Executive Condominium there will not be such option. For bank loans, the initial interest rate might be lower but there will be more down payments to be forked out. The maximum amount for bank loans will be 75% as compared to 90% for the HDB loans.
Other than the higher than normal income, buyers will also need quite a sum of money in their savings accounts and Central Provident Fund’s Ordinary Accounts to cover the amount.
The 75% loan amount is the maximum possible loan amount but buyers will also need to take into the consideration of Total Debt Servicing Ratio (TDSR). The TDSR which is capped at 60% of the monthly salary will also net off the other outstanding loans the buyers have such as car loan, credit card, etc.
Also to noted that the loan amount is also bounded by the Mortgage Servicing Ratio (MSR) which is capped at 30% of the monthly household income. The regulations dictate that only this amount of the monthly salary can be used to service the mortgage.
The total loan amount will be based on the amount calculated based on the TDSR and the MSR whichever is lower.
For Executive Condominium, there is MOP of 5 years as well
Similar to HDB flats, owners of ECs have to wait for 5 years from the day they have collected their keys before they are able to rent out the entire unit or to sell them in the open market.
Private Condominium is the most ideal selection but with higher price tags
Owning a private condominium is still a dream to pursue for many that is why they are still very popular today.
You May Want to Check Out Some of These New Condominiums
Below are the pros and cons of private condominium.
|No ceiling on income||Higher price, lower affordability|
|No MOP of 5 years, can rent whole unit anytime and can sell anytime||Cannot apply for CPF housing grants|
|No restriction on ownership, anybody can buy and can buy multiple units||Only can acquire bank loans, need to pay 25% of down payment|
It is the priciest among the 3 types but the most prestigious one. Buyers might need to find a good way to finance their purchases.
No restrictions on the ownership as well as no MOP
There is a 5 years MOP that are applicable to ECs and HDB flats which their owners will need to stay in the unit without any possibility of renting out the entire unit or selling it. These rules are not applicable for private condominiums. Also anyone who can afford can just own the property. And as long as those who have the money, they can buy as many as they can. There are no rules on how many private properties one can own.
Note that for those who wish to “downgrade” from private condominiums to ECs or flats bought directly from HDB, there is a wait out period of 30 months after selling their private properties before they can apply. If they are buying HDB flats in the resale market, there are no wait out period unless they are applying for HDB loan and/or applying for CPF housing grants.
Private condominiums provide more choices for lease and location.
There are 2 key distinctions between private condominiums and ECs. Private condominiums have different tenures from 99 to 999 years and even freehold while ECs are only 99 years leasehold. The lease period will have differences in terms of value and for those who wish to pass down their properties for generations.
The 2nd difference is that the locations are ECs are usually not that convenient and usually quite far from the public transport network such as bus interchange and MRT station. On other hand, private condominiums are located in many different parts of the island. But then, the more prime the location of the private condominium is, the higher are the pricings.
For private condominiums, they can only be finance by bank loan
Same as ECs, private residences can only service by bank loan. This means a 25% down payment is needed when comes to private property purchase. Banks are also known to be less stringent with HDB loans. For private property owners with repayment problem, actions taken are likely to be harsher.
No CPF housing grants for buyers of private property
For private properties, there are not restrictions from HDB and hence there will not have any subsidy given by HDB. Buyers are advised to check on their affordability before they commit to their dream private home.
Still having doubt about whether to buy a HDB, Executive Condominium or Private Properties? Contact us here and we will help you to evaluate to find the best choice for you!