Introduction
Property ownership for Singles in Singapore is never as straightforward as compared to couples and families, especially when it comes to purchasing a HDB subsidised property.
HDB subsidised property like BTOs and ECs are often sold at a subsidised price with the main intent of encouraging family formation. Hence, it is not uncommon to see priorities being given to family rather than singles when it comes to application and grant privileges.
But you and I both know that getting our hands on an EC, with a subsidised price, gives us a head start in our real estate investment journey.
Focus of this article
If you are single with no plans on tying yourself down in the mid to long run, and you are looking to purchase an EC without your parent’s involvement.
This article is tailored specifically for you.
In this article we seek to cover everything relevant to Singles looking to purchase an EC in Singapore. We will touch on the different eligibility criterias, financing requirements and alternative EC housing options available.
What is an EC ?
Let’s get the basics out of the way.
An executive condominium aka EC is a class of HDB subsidised property. The land that it is built on is being sold to developers at a subsidised price, allowing developers to pass on the discounts to eligible Singaporean buyers.
An EC possesses all the facilities and facade of a private condo, except for its 5 year minimum occupation period requirement.
Upon fulfilling its 5 year MOP, EC owners will be eligible to resell the property to Singapore citizens and PR. And upon reaching the 10 year MOP mark, the EC will achieve its full privatised status and can be further re-sold to foreigners.
Why should Singles consider buying an EC ?
Owning a condominium at a subsidised price
ECs are generally sold at a price discount of 25% – 30% compared to private condos within the same location.
From a lifestyle perspective, If you are single and you look forward to having a swimming pool, gym and tennis court at your doorstep, then an EC will serve as a much more affordable option than a resale private condo.
Potential for capital gain after MOP
On average, the first EC owners that purchase the property directly from the developer, typically realise a healthy capital gain ranging from $300k to $450k.
This is due to the high demand from prospective buyers and HDB upgraders, as EC that just MOP are relatively new and in good condition
So for Singles looking to get a head start in their real estate investment journey, an EC would be a good asset to own.
Ability to generate passive rental income
Given the EC has achieved its 5 year MOP status, you will be able to rent out the entire unit and consider moving back to your parents place to live, or find an alternate place of dwelling with your partner.
This provides an opportunity to create a passive income source that can help fund the mortgage of the EC, possibly with some monthly excess cash flow for keeps. .
Challenges for singles buying an EC
Before we dive into eligibility criterias, let’s quickly set the context by articulating the key challenges Singles faced when applying for a EC.
To qualify for a new EC, aside from meeting general criterias like income ceiling, age etc. You would need to form a family nucleus in order to qualify for an EC application.
Assuming you would like to have a place of your own and would not want to form a family nucleus with your parents.
The only option you have is to make an application under the joint singles scheme.
We will further expand on this in the section that follows, let’s progress by running through the general eligibility criterias first.
How can Singles be eligible for an EC purchase ?
General eligibility criteria to fulfil
- Age – must be above 21 years old or above 35 years old (when applying under joint singles scheme)
- Citizenship – must be Singapore citizen, if you are a PR must be applying together with a Singapore citizen spouse
- Income – must fall within the $16,000 income ceiling
- Family nucleus – Form a family nucleus with other singles to apply under the joint single scheme
What is the Joint Singles Scheme ?
The joint singles scheme allows up to 3, single women and men to come together, form a family nucleus and make an EC application together. The co-applicants can be related or unrelated in terms of family ties.
The criteria for joint singles is as follows
- All singles applicant must be Singapore citizen, PR not allowed In joint singles scheme
- All applicant must be above 35 years of age
- Applicant must be single (unmarried, legally separated or widowed)
What are the EC grants available for Singles purchasing an EC ?
Normally, when Singles purchase a resale HDB flat, you will be eligible for a Singles grant. The grant amount can go up to $40,000 when you purchase a 2 to 4 room resale HDB flat.
Unfortunately, in the case of Singles purchasing an EC, under the joint singles scheme. You will not be eligible for any Single grant.
Complexity of purchasing a property with a “unrelated” friend or partner
To actualise your EC purchase under the joint single scheme, you would most probably have to rope in a friend or partner that is not related to you either by marital or family ties.
This adds a certain layer of complexity to the issue of property ownership. As compared to purchasing as a married couple, property ownership would be more straightforward, you can easily go with a joint ownership structure.
Some complexity of owning a property with a unrelated friend or partner
- Uneven financial contribution – you or your friend paying more for the property
- Potential exit plan – what if your friend decide to sell the property after MOP and you choose not to
To address these issues beforehand it is important to first understand the “manner of holding”, i.e the different structure for property share ownership and applying that one that works for you.
What is manner of holding ?
Manner of holding refers to the structure of your property ownership.
There are two types of manner of holding available, joint tenancy or tenancy in common.
What is the difference between joint tenancy and tenancy in common ?
Joint tenancy is the default manner of holding that most related married couple will adopt. It meant that the entire property is held equally by both co-owners, there is no segregation of shares. Both you and your co-owners own 100% of the property.
Under joint tenancy, you would have to seek consensus of all co-owners for decisions related to the property and this ranges from rental of rooms to sale of your share in the property.
Tenancy in common is a shareholding structure that investors normally adopt. It allows clear demarcation of shares to cater for uneven financial contribution. You can structure for a 80-20, 60-40 or any share ownership distribution that best fits you and your co-owners financial contribution.
Under tenancy in common, each co-owners is free to do what they want to their shares and do not need to seek consensus from each other.
Tenancy in common could address the complexities of applying with “unrelated” co-applicants
Tenancy in common could potentially be an optimal shareholding structure you can adopt when applying with friends or partners under the joint ownership scheme.
It addresses the issue whereby you and your have different financial capabilities and is contributing different amounts to fund the EC purchase.
In the case of selling the property after it fulfils its minimum occupation period, your co-owners may be looking to exit his or her share, while you may want to continue owning the property. Tenancy in common will allow you to buy over your friend’s share.
How can Singles older than 21 year old but below 35 years of age purchase an EC
The few sections will be dedicated to Singles under 35 years old, but is above 21 years old and has the legal capacity to own a property.
Assuming you are below 35 years, you would not be qualified to apply for an EC, under the joint singles scheme. And if you are not keen to purchase an EC together with your parents, let’s explore the options you have got below.
Purchase resale ECs that have fulfilled its MOP period
For Singles below 35 years of age, the only option for you to own an EC solely under your name, would be to purchase an EC that has fulfilled its MOP period. As a side note, this option is also applicable for Singles 35 years old and above that have failed to ballot for a new EC, under the joint singles scheme.
In this case you would not be purchasing the EC directly from the developer, but you would be looking to purchase a resale EC that has fulfilled its 5 year minimum occupation period.
An EC that has fulfilled its 5 year minimum occupation period, functions almost like a private condo, aside from its restriction from selling to foreigners. You would not need to form any family nucleus or fulfil under income ceiling to purchase the EC.
Benefits of resale EC that have fulfilled its 5 year MOP
There are several benefits associated with resale EC.
No MOP requirement for resale EC
Firstly, you would not have to fulfil any minimum occupation period. You would just need to take note of the potential seller stamp duties to be incurred, if you sell the property within 4 years from date of purchase.
From an investment time frame perspective, this works in your favour, you will have the opportunity to sell the property for a property in 4 years, rather than wait out for a full 5 year MOP period.
Long lease life with minimal renovation and repair required
Next, considering the fact that you are the second owner of the EC, the EC would still be in good condition.
You would be able to move into the property with limited renovation and repair costs incurred. As compared with purchasing an older resale condo, there could be incremental repair costs required , to fix faulty air con, leaking toilet sinks, etc.
From a lease perspective, resale ECs that have fulfilled their 5 year MOP would still have at least 90 year lease remaining, after factoring couple years utilised during the construction phase.
This would serve as a valuable sell point for you, when you are looking to sell the property to your future buyer.
Price could still be lower than comparable private condo in the same area
Given that the initial EC owner purchased the property directly from the developer at a subsidised price. They could make significant profit even if they were to continue selling the property to you at a price lower than the private condo in the surrounding area.
So in the ideal situation, where you are able to purchase the resale EC at a lower entry price than surrounding private condos. You would still inherit the price advantage that a new EC possesses.
List of EC that have fulfil its MOP
If this option sounds like a plan for you, then here’s an exhaustive list that comprises all ECs and their MOP dates.
If you would like to have some help shortlisting a list of ECs that fits your selection criteria feel free to drop us a message by clicking on the link below.
How much would Singles need to finance an EC purchase ?
Note, the cost calculation below is applicable for both a new EC, purchased directly from the developer and a resale EC.
The only difference is that for a new EC, you would not be experiencing the full mortgage payment from day 1. Due to the benefit of the progressive payment scheme, your mortgage will be paid in accordance with construction stages.
For a more flexible alternative to the normal progressive payment, Singles can consider looking into the deferred payment scheme.
Wherelse, for a resale EC, you would be looking at the full mortgage payment from the day you take over ownership of the property.
As an example – purchasing a $1.4 million new EC
| Cost Component | Amount ($) |
|---|---|
| Price of EC | $1,400,000 |
| - | - |
| To fund downpayment - Cash or CPF | |
| Cash requirement for downpayment - (MAS stipulate minimum 5% for first property loan) | $70,000 |
| Cash or CPF | $280,000 |
| Total Dowpayment - 25% | $350,000 |
| - | - |
| To fund remaining amount - Private bank loan | |
| Loan - 75% | $1,050,000 |
Challenge with Singles securing a loan for EC
There are 2 challenges that arise with Singles looking to secure a loan for EC purchase
- Meeting the mortgage servicing ratio (MSR) requirement to qualify for the loan
- Met the mortgage servicing ratio (MSR) requirement but monthly income exceeds that 16k income ceiling for EC (only applicable for New EC purchase, income ceiling not applicable for resale EC)
Meeting the MSR requirement to qualify for the loan
Referring to the calculation above for the purchase of a $1.4 million EC, you need a loan of at least $1.0 million to finance 75% of the purchase value of the property.
The mortgage servicing ratio (MSR) is applicable when purchasing a new EC, this is the same ratio used to regulate loan quantum for BTO application. It stipulates that the monthly loan obligation must not exceed 30% of monthly income.
So, in order to qualify for the $1.0 million loan quantum, you and your joint applicants’ combined income must be at least $17,000, when applying under the joint applicant scheme.
Assuming you are applying with another Singles, your friend or partner, each of you must have a monthly income of at least $8,500.
Meeting the 16k income ceiling for EC eligibility
Here comes the dilemma, and this is an issue faced by all prospective EC buyers, beyond Singles buying under the joint singles scheme.
Given that you would need a combined income of at least 17k to qualify for the EC loan, but the income ceiling is 16k, it effectively limits the maximum loan amount that you are able to take.
Referring back to the same example of purchasing a $1.4 million EC, applying the 16k income ceiling. The effective maximum loan you are able to take is $930,887.
This meant that aside from the 25% downpayment to be funded by cash or CPF. You would have to top up another $69,113 in cash to fund the shortfall in loan, caused by restriction due to the 16k income ceiling.
If calculation is not your thing, let our experts do it for you. Click on the link below for a financial calculation tailored to your financial situation.
EC bedroom type that a Single can consider
Selection of bedroom type would be another topic that you would need to consider when purchasing an EC.
Aside from personal living needs, the bedroom type that you select would have future implications on how well you are able to resell your EC.
2 Bedroom EC
The benefit of a 2 bedroom EC is that it comes at a lower price, meaning it would be more affordable for you and your single joint applicant. This also meant that it will be easier to support the monthly mortgage of the 2 bedroom EC.
The drawback of a 2 bedroom EC is that there is limited supply available for your selection. Most of the latest new EC launches in recent years exclude development of 2 bedroom units and only offer 3 bedroom units and above for selection.
Next, when it comes to reselling the EC, your prospective buyers are mostly families, so a 2 bedroom unit may not be the most sought after bedroom type.
3 Bedroom EC
This would be the optimal bedroom type for you to consider when purchasing an EC. It offers the greatest ease of reselling, with greatest demand from families looking to upgrade from a HDB to an EC.
However, on the flip side, you would have to shoulder the affordability challenges of purchasing a higher quantum purchase.
Dual Key EC
Dual key ECs are out of the question, as it is only eligible for multi generational living, specifically for married / engaged couples living with parents or widowed or divorced family with children living with parents.
Final Words
This makes the conclusion of our comprehensive guide for Single looking to purchase an EC.
We have written extensively about EC purchase as we felt that it is an essential building block for real estate asset progression. Do check out our other articles on decoupling and methods to avoid ABSD, if you are interested in acquiring your second property.
