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EC or BTO

Executive Condo (EC) or BTO?

This question has been asked many times, and there are many other articles addressing this question.

Instead of campaigning for one party based on commonly known attributes like facilities, the size of the bedrooms, etc., this article will put in the numbers to (1) the cost of buying, (2) maintaining and financing these properties and (3) their potential investment return. The main objective of this article is to provide you with a clear overview of the monetary commitments and rewards in purchasing either EC or BTO.

For this article, a couple with a combined gross income of SGD 10,000 looking to buy their first home will be used as our reference. Based on their combined income of SGD 10,000, the couple will be able to afford at least a HDB 4 room and an Executive Condominium costing around SGD 750,000. And having worked for 4 years, their CPF savings should have amassed to around $110,000.

Buying

Cost of BTO and EC

Taking a recent BTO launch in August 2016, the HDB 4 room (1,001 SQFT) at Valley Spring @ Yishun is between $251,000 and $297,000. And a 3-Bedroom Premium (1,001 – 1,098 SQFT) Executive Condo in the same estate, The Criterion EC, is selling between $740,800 and $836,000.

By comparison, the price of an Executive Condo is easily 2 to 3 times that of a BTO.

Also, for the purpose of illustration in this article, the purchase price for the HDB and EC will be taken to be $274,000 and $788,400 respectively. For simplicity sake, these figures are the average of the lowest and highest price range.

Down payment for BTO and EC

BTO has the option of taking a HDB concessionary loan. So, if you are planning to get the HDB concessionary loan, the down payment required is 10% of the purchase price, and the entire purchase can be funded by CPF. Also, at the point of key collection, your CPF monies available in the Ordinary Account will be wiped up to pay for the BTO before the HDB loan kicks in.

The other financing option for HDB is a bank loan. By taking a bank loan, assuming you qualify for 80% loan, you will have to prepare 5% of the purchase price using Cash. The remaining down payment of 15% can be paid using cash or CPF.

For Executive Condominium, assuming the banks are able to loan you up to 80% of the property value, you would need to have 5% cash for the down payment and the remaining down payment by cash or CPF.

Grants Available

For a couple with combined income of S$10,000 per month, there would be no grant available for the purchase of BTO.

For Executive Condo, the couple will be entitled to S$30,000 grant.

Renovation Cost

For BTO, renovation is usually required to install a new kitchen, wardrobes, sanitary wares, tiles, air-conditioners, etc., which is typically costing around $20,000 for a basic package.

For Executive Condo, a coat of paint and installation of lightings will get the house ready for moving in, typically setting you back by $5,000.

Stamp Duty and Legal Fees

For BTO, the buyer stamp duty is $3,680, and the buyer stamp duty for the Executive Condo is $18,252. The legal fee for BTO if handled by HDB legal office is $177 to $322 while the legal fee for Executive Condo is approximate $2,500.

Summary I – Buying

Property TypeBTO (HDB Loan)BTO (Bank Loan)Executive Condo
Reference Property Size1,001 SQFT1,001 SQFT1,001 - 1,098 SQFT
Reference Purchase Price$274,000$274,000$788,400
Down payment$27,400
(CPF can be used entirely)
$54,800
(Min 5% to be paid with Cash (i.e. $13,700, rest can be CPF/Cash)
$157,680
(Min $39,420 has to be paid in cash, rest can be settled with CPF)
Payment after Key Collection110,000
(All available CPF monies in OA will be used to pay for the BTO before the HDB Loan kicks in)
Bank Loan Kicks inBank Loan Kicks in
Grant00-$30,000
Estimated Renovation Cost (Basic)$20,000$20,000$5,000
Stamp Duty$3,680$3680$18,252
Legal Fee$177$322$2,500
Cash & CPF Required/Used at Point of Key Collection$188,657$78,802$153,432
Summing all the one-time cash and CPF outlay required, the down payment required for Executive Condominium is much higher than BTO (Bank Loan).

For BTO (HDB Loan), the cash / CPF needed is higher due to the requirement of using all the CPF monies in the OA before the HDB loan kicks in. The downside of clearing your CPF OA account is that you wouldn’t be able to use it for investment, but the upside is that you have lower mortgage and interest to pay down the road. Some people invest their monies in the CPF OA account before collecting the keys to avoid the fund to be wiped up in one go. But like all investment, there are risks, so do your research and assess if you would like to put the fund into investment or paying off the BTO.

Running Cost for 5 Years

Monthly Mortgage

The current interest rate for HDB concessionary loan is 2.6% with a maximum tenure of 25 years. One of the conditions for taking HDB loan is that CPF in the ordinary account will be wiped up to pay for the HDB and the remaining balance will be financed by the HDB loan. Given this scenario, the loan amount would be $164,000, and the monthly repayment will be $744.

By taking a bank loan, the couple would have the option to take up to 80% loan for the BTO (usually couple would take up to 80% loan so they can use the surplus fund for other purposes). With 80% loan and, say, the interest of 1.38% (Current DBS Fixed-Deposit Link Rate), the loan amount would be $219,200, and the monthly repayment will be $864.

For the Executive Condo, with 80% loan and interest of 1.38%, the loan amount will be $630,720, and the monthly repayment will be $2,487.

Visibly, monthly repayment for Executive Condo is easily 2 to 3 times more than a BTO.

Recommended Tool: Mortgage Repayment Calculator

Other monthly charges payable

For BTO, there will be a conservancy fee of $55 and season parking per car under shelter will be $110 per month. For Executive Condo, the maintenance fee will be around $240 per month.

Summary II – Maintaining / “Running” Cost

Property TypeBTO (HDB Loan)BTO (Bank Loan)Executive Condo
Reference Property Size1,001 SQFT1,001 SQFT1,001 - 1,098 SQFT
Reference Purchase Price$274,000$274,000$788,400
Down payment$27,400
(CPF can be used entirely)
$54,800
(Min 5% to be paid with Cash (i.e. $13,700, rest can be CPF/Cash)
$157,680
(Min $39,420 has to be paid in cash, rest can be settled with CPF)
Payment after Key Collection$110,000
(All available CPF monies in OA will be used to pay for the BTO before the HDB Loan kicks in)
Bank Loan Kicks inBank Loan Kicks in
Loan Amount$109,200$219,200$630,720
Monthly Mortgage Repayment$495$864$2,487
Monthly Upkeep$165$165$240
Cash/CPF used for Financing/Maintaining over 5 years$39,600$61,740$163,620

BTO (HDB Loan) and BTO (Bank Loan) has a much lower monthly obligation of around $660 and $1,029 whereas the monthly commitment for Executive Condo is $2,727. As for the cash required for monthly commitment, BTO (HDB Loan) and BTO (Bank Loan) needs $165 for the Conservancy and season carpark fees. For the Executive Condo, the maintenance fee of $240 has to be paid in cash and part of the mortgage has to be topped up with cash, which is estimated to be around $187.

Investment Outlook

Finding a place you can call home should take priority over the investment opportunity.

But who would not want to make money out of their home too?

So, let’s us take a look at the investment outlook of BTO and EC at the 5-year point where they can be put up for sale on the open market.

Paper Gain on Purchase

Assuming that the property market remains stagnant for 5 years, i.e., no changes in the prices of the resale HDB and Executive Condo.

Based on the current median resale price of HDB 4 room in Yishun which is $369,000, the couple would make a gross paper gain of $95,000.

As for the EC, historical data has shown the average price gap of Executive Condo and Private Condo is 9% after EC reaches it MOP of 5 years. Using Skies Miltonia as a reference, based on 54 transactions, the average price of a 3 bedroom at Skies Miltonia is around $1,158,224, the paper gain for getting the 3 bedroom premium at The Criterion is $265,584.

How would the Return on Cash / CPF Stack Up?

In general, 1st owner of the BTO and Executive Condo are likely to make decent gain from their purchase. In fact, they tend to be better than getting a property from the resale market due to the low purchase price.

Based on our projection, the Executive Condo trumps BTO (HDB Loan) and BTO (Bank Loan) in terms of the % return on cash / CPF used over the 5 years. For every dollar put into the Executive Condo, the dollar will generate about 0.84 cents, while for BTO (HDB Loan) and BTO (Bank Loan), 0.42 cents and 0.67 cents are made respectively.

Property TypeBTO (HDB Loan)BTO (Bank Loan)Executive Condo
Reference Property Size1,001 SQFT1,001 SQFT1,001 - 1,098 SQFT
Estimated Resale Price369,000369,0001,053,984
Reference Purchase Price274,000274,000788,400
Estimated Gross Profit95,00095,000265,584
Total Cash / CPF used for Property Over 5 years.228,257140,542317,052
% Return on Cash / CPF used426784

What does it mean for you?

Both BTO and Executive Condominium have their own pros and cons.

A BTO with its lower price means that the financial responsibility would be lesser and you may use the surplus in your CPF OA account for other investment. For Executive Condo, you may have to top up some cash (in our case $187) to finance the property as the monthly CPF contribution may not be sufficient.

Regarding investment outlook, Executive Condo is likely to have the edge over BTO due to its room for capital appreciation. The resale prices of Executive Condo is pegged against the private condominium whereas prices of resale HDB is “loosely controlled” by HDB to ensure its affordability and achieve HDB aim of providing affordable housing for Singaporean and PR.

Once again, we hope that the above information would help you make a better-informed purchasing decision. If you have any questions or feedback, you may email us at [email protected] or leave us your comments using the dialogue box below.

Interested in Executive Condominium? You can now access all information you need about your interested Executive Condominium at our Executive Condo Project Pages. Furthermore, you can make an appointment with the developer sales team directly through our website at no extra charges and no commission payable.

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Note: The above article is intended to provide general information. Although we endeavour to ensure that the information contained herein is accurate, we do not warrant its accuracy or completeness or accept any liability for any loss or damage arising from any reliance thereon. The information herein should not be treated as a substitute for separate professional advice concerning particular real estate situations. If you would like to obtain advice, please do not hesitate to get in touch with us at (65) 6100 1344 or [email protected]

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