In a recent Our Singapore Conversation session where the Minister of National Development exchanged views on housing related issues with participants, the Executive Condominium (EC) scheme stole the limelight with mixed opinions over its future. While some called for its removal, an almost equal proportion of participants supported its continual existence.
To readers who are not familiar with this housing scheme in Singapore, ECs were introduced by the government to fill the price gap between public housing developments and private condominiums. Built by private developers on land sold through government land sales, ECs offer furnishing and facilities similar to those typically found in private condominiums. However, buyers are bound by certain restrictions set by the government, such as a combined monthly income of the qualified family unit not exceeding SGD 12,000 and a minimum occupation period (MOP) of 10 years before the development can be sold directly to locals and foreigners on the private market without any restrictions being placed on the new buyers. EC owners can sell their properties to only Singaporeans and permanent residents (PRs) after fulfilling a shorter five-year MOP. The hybrid public-private ECs thus prove largely popular among middle income couples or upgraders from public housing developments, who find the prices of private condominiums prohibitive.
Given these restrictions, ECs are typically priced at a discount to nearby private condominiums. In recent months, the prices of new ECs have, however, reached new highs, mirroring the price trend of private condominiums. Despite the record prices, new ECs still see strong demand, with units oversubscribed at launch. This is likely attributed to buyers comparing ECs to private condominiums, with the expectation that ECs after 10 years could see an upside in value when the project is fully privatised. The motivation for developers to outbid one another for the lucrative plot of land also results in higher land costs being factored into the selling prices.
As the government mulls over revising current policies behind the EC scheme, policymakers could, for a start, consider phasing out the subsidies offered to EC purchasers. Such subsidies are currently offered to a higher income group to aid the purchase of ECs, while some amongst the lower income group – which has to largely settle for public housing developments – receive lesser subsidies, creating an inequity that distorts the distribution of wealth.
Beyond the upfront subsidies, the quasi-public-private nature of ECs also creates another latent subsidy, as properties are purchased at a discount to comparable private condominiums, allowing potential price appreciation after the MOP. The government should hence re-evaluate whether future ECs should instead be retained as another type of public housing, with the pricing determined by the government and any resale restricted to locals who have to fulfil the MOP requirement. In addition to enabling the healthy recycling of this premium public housing development among locals, this shift would also clearly delineate the market demand that is to be met by the public and private sectors accordingly.
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