BTO Flats vs Executive Condo:
Top 5 Key Differences You Need to Know About
Ever since the built-to-order (BTO) HDB flat purchase system was introduced back in 2001, it has become synonymous with marriage proposals and starting a family in Singapore. By default, happily-in-love couples would try to ballot for a new flat a few years in advance so they can time their big day and the move-in perfectly.
But due to its budget-friendly nature, BTOs filter out Singaporeans in the higher income bracket and these lucky (or not) guys are forced to turn towards another housing type that is, arguably, lesser known - the executive condominium (EC).
EC purchases do not fall under the jurisdiction of HDB as they are built by private developers and they come with condo facilities as you would see in an actual condo. But it does overlap with public housing in a sense that you can apply for housing grants. To distill a better understanding of what they are all about, we compare the EC to Singapore’s perennial favourite.
CPF Housing Grants
It is safe to say that housing grants for BTO flats are a little more generous. Applicants are eligible for both Additional Housing Grant (AHG) and Special Housing Grant (SHG) which can hit as high as S$80,000 depending on your income. Although EC purchases are the only type of private development that can qualify for housing grants, only Family Grant and Half-Housing Grant can help offset the cost. Again, depending on the average household income of all the applicants, up to S$45,000 can be disbursed.
Granted, these additional subsidies are making new public housing a lot more attractive.
Similar to HDB flats, applicants of EC can do so under the same four schemes: Public (singles applying together with family), Fiance/Fiancee, Orphan or Single (up to 4 applicants of age 35 and above). That’s where the similarity ends. To ensure adequate supply for middle-income Singaporeans, BTO applicants cannot be earning more than S$12,000 (combined monthly income for couples) for 4-room flats, or S$6,000 for 3-room units in certain non-mature estate projects. The income ceiling for EC is S$2,000 higher at S$14,000, thus putting EC as the ‘sandwiched’ class that caters to those with higher earning power.
Private property investment
You have to occupy your new house for a minimum of five years before you can think about monetising it. That’s non-negotiable for both BTO and EC apartments. But monetising doesn’t have to mean renting out your spare bedrooms or selling it altogether, you could be looking into your second property for investment purposes. After fulfilling the MOP, you are allowed to buy another condo unit; BTO owners must continue staying in their current home, but EC owners have the option not to. That means if the EC peeps could really get used to staying at a full-fledged condo, they can conveniently make the transition and rent out their EC house instead.
BTO buyers have the luxury of choice: HDB or bank loan. But that luxury can turn out to be a back-and-forth dilemma because of the differences in loan quantum, interest rates and repayment period. The good thing about HDB loan is that you can fund the flat 100% with your CPF monies, including the 10% down payment (max loan quantum 90%). Full settlement must be done within 25 years.
EC buyers have no choice but to apply for bank loans only; max repayment period is longer at 30 years but you can only borrow up to 80% of the apartment’s valuation. Out of the remaining 20%, at least 5% requires a cash outlay. Looking at the current prices of ECs, you should be having at least S$30,000 to S$40,000 cash on hand. Unlike HDB’s fixed 2.6% concessionary rate, bank loans work on either variable or fixed rate packages and you can refinance after the lock-in period if market rates are not favourable. Also, you’ll have to do your own shopping and comparison but fortunately, we got that covered.
BTO flats are pretty straightforward. You wait about three to four years for the concept and building phase to be over, you then collect the keys and stay for at least five more years, and only then can you sell if you want to. ECs are a slightly more complicated beast. This type of housing is private, yet it feels like public at other times. You are also locked in for the first five years and from the sixth to tenth year, you can turn it into a resale like its BTO counterpart. However, you may only sell to Singapore citizens and PRs. Your market pool of potential buyers is widened from the eleventh year onwards when you can start selling to foreigners like an actual condo.
Bonus: price difference
Do we really have to state the obvious?
But we will illustrate anyway. Based on price data we gathered on similar-sized BTOs and ECs in the same neighbourhood, BTOs are about 50% to 60% cheaper than ECs. Without taking into account interest on mortgage, miscellaneous fees and property legislations, one EC unit can buy you two BTOs. As if BTOs aren’t already making a more than convincing case here, most EC developments take place in non-mature estates, just like BTO launches. We’ll let you take over from here.