EC Income Ceiling – Hacks to overcome and alternative solutions

Fortune favours the unconventional thinkers in real estate

Welcome. Kudos to you for landing on this article. 

Fortune favours unconventional thinkers. From our experience, to make money in real estate, you often have to take unconventional steps or even make some lifestyle sacrifices to make your first pot of gold. 

We have seen families compromise by squeezing in a 2 bedroom, 764 sq ft condo while renting out a large 3 bedroom unit and eventually flipping it for a handsome 400k plus profit. 

There are also buyers that downgraded from their spacious 4 bedroom ECs and restructured their portfolio to a smaller 3 bedroom unit and a new launch 2 bedroom investment property. 

The fact that you landed on this article, I believe you are looking for ways to qualify for the purchase of a New EC, and the EC income ceiling is a hurdle that you will need to overcome. 

The scope of this article 

The focus of this article revolves around developing an understanding of the technicality of how EC income ceiling is being calculated and most importantly ideating unconventional methods for you to consider to qualify for the EC income ceiling. 

We are Decoupling Expertise 

We are a team of specialist realtors that specialises in helping our readers work their way towards owning 2 properties in Singapores. Helping our readers decouple their property to purchase a 2nd investment property is core business. 

But lately, we realise the importance of getting our readers to own the optimal 1st property before even having the opportunity to decouple and purchase a 2nd one. 

So we have extended our content and services to assist our readers in procuring their 1st new EC or resale EC. We believe this will set the stage for further opportunities to own a 2nd property.

Feel free to drop us a whatsapp text to clarify any doubt, or to find solutions to challenges you are facing in real estate investing. 

What is the current EC income ceiling ?

The current EC income ceiling stands at $16,000. 

This meant that the combined income of all joint applicants or listed occupier in the EC application must not cross the $16,000 mark. 

So today if you and your wife or fiancee would like to apply for a new EC. If your gross monthly income is $8,000 per month and your partner’s gross monthly income is $8,500. Your combined household income of $16,500 would have exceeded the EC income ceiling, and you would miss out on the opportunity to purchase a new EC. 

Why is the EC income ceiling such a pain ?

Consider the following list of real estate asset class ranked in order of their average profitability

• BTO – average $300k to $500k profit > Income ceiling $14k 
• New EC – average $400k to $800k profit > Income ceiling $16k 
• New Launch condo – average $300k to $600k 
• Resale condo – average $300k to $450k > Only if you own the right unit
• Resale EC – average $300 to $500k > if you purchase immediately after it MOP

Now imagine you are an average, middle income family with a combined income hovering between $17k and up. You would have missed out on 2 asset classes, BTO and New EC, that can bring you your first pot of gold as your first property. 

If you are looking for a property that can provide you with immediate occupancy, new launch condo is out of the option, that leaves you with Resale Condo and Resale EC as possible considerations. 

We left out resale HDB, from an investment perspective this may not be a prioritised asset class due to restrictive government policy and threat of decaying lease. 

The government’s intent behind the EC income ceiling …

The core intent behind the EC income ceiling is to ensure that subsidised housing falls into buyers that actually require this subsidy. The ceiling is set to prevent high income households from depriving lower income households from government subsidised housing. 

Admittingly, the Singapore real estate market being the healthy state that is in today is attributed to the policies that our government set. 

The point to this section is aligned on the understanding that we should quit complaining and innovate within the current established framework to optimise towards the best real estate profit outcome. 

How is the EC Income Ceiling being calculated ?

Before we move into discussing ways to optimise your household into such that it fits into the EC income ceiling. Let’s first get our fundamental right. 

The EC income ceiling is calculated using the following steps

# 1 – Determining who are the joint applicants 

If you are applying under the family scheme, the joint applicant could be you and your wife or if you are applying with your parents, it would be you and 1 or both of your parents. 

If you are applying under the fiance and fiancee scheme then the joint applicant will naturally be you and your fiance or fiancee. Similarly, under the joint singles scheme, joint applicants could comprise up to 3 unrelated Singles. 

You could be looking to have more than 2 joint applicants for the sake of formalising and legitimising ownership and financial contribution. But from a meeting income ceiling perspective it would be best to keep it to a minimal number of joint applicants to reduce your combined household income being assessed. 

Example

Applying for a New EC – Husband, Wife and Son

Assessable combined household income = Husband ($7,000) + Wife ($7,000) + Son ($4,000)  = $18,000 – Exceeds EC income ceiling of $16k 

Applying for a new EC – with just Husband and wife 

Assessable combined household income = Husband ($7,000) + Wife ($7,000) = $14,000 – Meets EC income ceiling of $16k

Must have spouse name in joint application 

In case you are thinking of leaving out your spouse name and using an unemployed parent name or an unemployed child’s name. We explored that option as well. 

That is not possible, HDB mandates that your spouse name be listed in the application either as a joint applicant or an occupier. 

#2 – Determining the assessable income for each applicant 

So this is the area where there are “opportunities for optimisation”. I have seen couples with extremely high income qualify for the $16k EC income ceiling, as a significant portion of their pay package is payout as variable bonuses. 

The next time, you see your friend who is a government scholar or high flying civil servant qualifying for the application of a New EC. There is a high chance they are receiving a “normal” monthly salary but they are receiving 5 to 8 months worth of variable bonuses at the end of the year. 

Here’s a summary of what’s assessable as monthly income and what’s not when it comes to calculating your combined household income for EC Income Ceiling. 

EC Income Ceiling Hacks ?

If you qualify for the EC income ceiling then congratulations you should on your way evaluating if you qualify for other EC eligibility criterias. We will provide a summarised section for this in the latter section. 

For those that did not qualify or missed the EC income ceiling marginally consider the following EC income ceiling hacks. 

By no means these are prescriptive methods that are applicable to everyone. But I felt that it is useful from the point of igniting ideas towards overcoming this rigid EC income ceiling hurdle, especially for investment minded buyers who are looking to get their hands on a New EC. 

Think about it, it takes some ingenuity to level the playing field right ?

If a high earning government scholar can qualify for a new EC, while you being a industrious 8-5 corporate employee, narrowly missing the income ceiling missed out on your first pot of gold. Shouldn’t you attempt to be innovative ? 

#1 – For EC applicants with fixed salary 

So here’s the guideline, here’s how HDB would assess your monthly income. 

For salaried employees with a fixed salary, your most recent pay cheque will be used for income assessment. 

If you are in-between jobs. Your last drawn pay cheque will be used. This is applicable if you have been jobless or taking a no pay leave for a period lasting not more than 6 months. 

But here’s the cruz, if you went on a no pay leave or are unemployed for more than 6 months then you are deemed unemployed and zero income will be assessed. 

Example of how this can work 

Wife goes on no pay leave for 6.5 to 7 months to take care of the newborn child. The family applied for a new EC and wife resumed work after EC application. 

Husband takes a sabbatical of greater than 6 months to pursue further studies in MBA, Juris Doctor, Data Engineering while family makes an application for EC. 

#2 – For EC applicants with variable income components

You have worked as a Pnl Owner in a corporate job or if you are in finance or accounting, you will be familiar with the concept of early or postponed revenue recognition. 

HDB assesses EC applicants with variable income by assessing the average of your last 3 months’ pay before CPF deduction. 

So if your commission salary plays out to the following 

• Earlier months – $10,000
• Month 1 – $18,000
• Month 2 – $16,000
• Month 3 – $18,000
• Some months later – $10,000

Then you are most lightly going to exceed the EC income ceiling. 

But if you are able to defer the recognition of commission to later months, then your chances of meeting the EC income ceiling could improve. 

• Earlier months – $10,000
• Month 1 – $8,000
• Month 2 – $8,000
• Month 3 – $8,000
• Some months later – $18,000

Easier said than done, but it’s a thought for you to ponder upon and work within your own personal locus of control. 

#3 – For Business Owners

Let’s rehash some highlights from the income component table on the items that are not assessed for household income. 

So having understood that annual wage supplement, variable bonuses and dividend income is not assessable for EC income ceiling calculation. As a business owner or entrepreneur, you could have the leeway to receive more dividends or bonuses as income instead of a high monthly pay cheque ?

Potentially this may have some income tax advantages as well ?

What are the alternative solutions if this hack doesn’t work for me ?

Totally understand that the hacks above fringes on the outlandish side of things and if it doesn’t work for you, do not let this put a stop to your quest of finding a property with good capital appreciation potential. 

Here are some alternative solutions you can consider. Note that we left out purchasing resale HDB as an option. From an investment perspective, we don’t like the odds of dealing with the threat of decaying leases and facing restrictive government regulatory headwinds. 

#1 – Purchase Resale EC 

New ECs are good to have, but resale ECs bought at the right time with the right entry price could be equally good if not better. 

Pros of resale EC 

• Shorter mandatory holding duration – no need to wait out 5 years to fulfil minimum occupancy period before reselling property.
• Immediate occupancy – ready for immediate move in, no need to wait for 3 years for the unit to be constructed.
• Physical viewing before purchase – greater certainty to unit layout and facing

Cons of resale EC

• No CPF grant available
• Potentially smaller quantum capital gain vs new EC 
• Older lease life compared to a brand new EC 

Average profits derived from resale EC 

Riverparc Residences Resale EC – Buyer’s average profit purchasing on 1st year after MOP

Heron’s Bay Resale EC – Buyer’s average profit purchasing on 1st year after MOP

Refer to article Buying resale ec – Is it profitable ? – for more insights on this topic

#2 – Purchase Private Condo

It is not the end of the world if you miss out on purchasing a new EC or even a resale EC as your first property. There are good investment opportunities within the resale condo space as well. 

The key is to exercise careful due diligence in selecting the right development and the right unit within the developments. 

As a overview these are the key attributes to look out for

1. Try to avoid purchase a private condo in an area filled with more affordable resale ECs unless price is very competitive
2. Optimise towards purchase a younger condo development with long remaining lease life to avoid concerns over lease decay
3. Optimise towards purchasing a unit in a mid to large size development, avoid small boutique developments
4. Select developments with the right attributes that buyers are looking for. Eg proximity to reputable primary school, efficient layout, affordable purchase quantum
5. Prioritise developments in locations whereby there are upcoming GLS land sale or new launches that will prop up prices.

Refer to the following articles for more insights on selecting resale condo developments

• Is resale condo worth buying ?
• Spotting undervalue property in Singapore – Analysing price gap between new launch and resale property 
• Which condo is good for investment in Singapore ?

Is the current EC Income ceiling fair ? 

Valid question, but a non constructive endeavour to ponder upon this. It will be much more constructive use of time and resources for you to understand the existing framework and find ways to derive the best strategy work within its framework for the best profit outcome. 

EC Income ceiling, avoiding ABSD on 2nd property, owning 2nd property while holding on to a HDB, all rewarding endeavours that require you to take extra steps to realise your plans. 

Gaining a competitive edge when buying an EC ? 

Think about it, what does buying a new EC entails ? You are essentially sealing a multi million dollar purchase by relying on a couple of viewings and some assurance from your property agent.

The only way to ensure you place your money in the best development is to do your prep work, lots of prep work, lots of research. 

Objectively parsing through facts and numbers to decide if the EC you are considering …

Is it priced fairly ?

Are there any upcoming price catalysts ?

Does it possess fundamental attributes that buyers desire? I.e school, affordability ?

If research is not your cup of tea, the smarter way is to outsource it to someone who enjoys doing it.