Three tweaks to EC scheme

PHOTO: Three tweaks to EC scheme

SINGAPORE- The executive condominium (EC) scheme has been tweaked to bring the terms for ECs closer to that for public housing and to support a stable and sustainable EC market.

The Ministry of National Development said yesterday that there will be three changes following a review, which took into account feedback from the Our Singapore Conversation.

The first change involves the Mortgage Servicing Ratio (MSR) for EC housing loans from financial institutions for units bought directly from developers. The MSR, imposed by the Monetary Authority of Singapore (MAS), will be capped at 30 per cent of gross monthly income and will apply to purchases where the option-to-purchase is granted today and hereafter.

Previously, the MSR did not apply to ECs. Analysts see this as an effective move to cool demand for this class of housing.

Ong Kah Seng, director at R'ST Research, said the implementation of a total debt servicing ratio (TDSR) framework shifted the demand for private housing towards ECs. This is because HDB monthly mortgage payments were not factored into TDSR calculations.

Mr Ong said: "This measure will ensure that buyers purchase ECs in accordance with their earning capacity and that developers cannot excessively raise prices since, going forward, the pool of eligible EC buyers might shrink."

Nicholas Mak of SLP International said that with the MSR cap, the quantum that homebuyers can pay - assuming an 80 per cent loan over 25 years taken out by a couple with $12,000 in combined monthly income - comes up to about $950,000.

The prices of popular four- and five-room EC units now start at $1 million, he said.

The second change is that second-timer applicants who buy EC units directly from developers must now pay a resale levy, just like second-timer applicants who buy Build-To-Order (BTO) flats. This is to "ensure greater parity", MND said.

This levy will range from $15,000 to $50,000, depending on the flat type of the first subsidised flat; if the first subsidised unit was an EC, the levy is $55,000.

The third and final change is the reduction in the cancellation fee for EC buyers from 20 per cent of the purchase price to 5 per cent, in line with the practice for BTO flats. This new cancellation fee took effect yesterday; it will apply to buyers of units in projects with land sales taking place from yesterday, including those where the tenders have not closed.

MND said that unlike private property buyers, EC buyers who cannot complete their purchase cannot sub-sell their units and have to pay a cancellation fee.

The previous cancellation fee, pegged at 20 per cent of the purchase price, imposed a significant financial burden on young couples who are unable to proceed with their marriage and hence, the EC purchase, MND said.

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