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BTO or EC – Which should you choose?

· Buying a property

BTO or EC

Which One To Choose?

When it comes to purchasing a new home, one question that stumps many a prospective buyer is whether to choose a BTO (Build-to-Order) or an EC (Executive Condominium).

Both BTOs and ECs start out as subsidised public housing. One of the main differences, at least at the outset, is the household income ceiling.

However, as with most things in life, BTOs and ECs have their pros and cons. Let’s consider them.

BTOs

Here is how BTOs stack up.

1. You can get a bigger grant

ECs are designed to cater to the so-called sandwich class – those more affluent than the average BTO buyer but who cannot yet afford private property. Accordingly, first-time buyers of ECs are only eligible for the Family Grant, which entitles them to a maximum of $30,000.

2. You have a wider choice of loans

As a BTO buyer, you have a choice between taking a HDB loan or applying for a bank loan. The HDB concessionary loan allows you to borrow up to 90 per cent of the flat’s purchase price. Note that the loan tenure is capped at 25 years or until the buyer is 65 years old, whichever is shorter.

With banks, the loan ceiling is 80 per cent of the flat’s valuation. And the tenure extends up to a maximum of 30 years.

As an EC buyer, you are only allowed to take a bank loan.

The HDB loan rate, which hardly ever fluctuates, is set at 2.6 per cent per annum. Bank interest rates are typically lower but more volatile. Buyers typically opt for a HDB loan if they want stability.

3. You may not need to pay any cash for your downpayment

With the HDB loan covering 90 per cent of the price of the unit, buyers can choose to fully service the remaining 10 per cent downpayment using their CPF funds. In other words, no upfront cash is required.

Whereas for bank loans, the 20 per cent downpayment needs to be a mix of cash and CPF and/or housing grants. Up to 15 per cent can come from the latter, leaving the remaining five per cent as the cash component.

ECs

The supply of new ECs has dwindled over the last two years, with only two launches in 2017 and, so far, only one in 2018: the upcoming Rivercove Residences.

However, ECs can and do become literal hot property when they are launched. Hundred Palms Residences sold out within seven hours last July.

Scheduled to launch in the first half of the year – as early as March – Rivercove Residences will see 620 units being added to the housing stock.

This is how ECs compare.

1. You will have a larger pool of buyers when you eventually sell your unit

ECs convert to private properties after 10 years. From year six to 10 – owners must first fulfil the five-year MOP (Minimum Occupation Period) – they are sold as regular resale flats, meaning only Singaporeans and Permanent Residents can buy them.

However, once the 10-year mark is crossed, foreigners and companies become eligible as well, as is the case for regular private apartments. This opens up the pool of potential buyers.

Permanent Residents also do not have to wait out the three-year period in order to buy a privatised EC, unlike with regular resale flats. You can find out more about their eligibility and restrictions here.

2. You can enjoy condo-like facilities

Since ECs are built by the same developers who put up private condominiums, you get to reap the same benefits as those living in condos.

This includes a variety of amenities such as round-the-clock security, landscaped gardens, as well as sports, wellness and leisure facilities like swimming pools, jacuzzis, jogging tracks and karaoke rooms.

Conclusion

Ultimately, deciding between a BTO and an EC comes down to a question of affordability, your family’s requirements, and your financial goals. In a nutshell, BTOs make the better value proposition with a lower entry price, while ECs require a bigger financial commitment but offer better lifestyle options.

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