On 9th December 2013, Ministry Of National Development Board (MND) issued a public statement to announces the changes to its existing measure for Executive Condominium.
Changes that is applicable only to EC land sales on or after 9th Dec 2013
- Reduce of cancellation fee from 20% to 5%
- Resale Levy shall apply for 2nd timer for EC
- Mortgage loan to peg to Mortgage Serving Ratio (MSR) which currently set at 30%
All these changes are made after calls to make EC comply with HDB regulations as there are rumours that some buyers are exploiting the loopholes such as $30k grant even for the 2nd timer. This step is taken to make the policy to be fairer.
However, the step to peg the mortgage loan to MSR which is currently 30% does not make very much sense. As the prices for EC are easy twice the price for BTO. For a married couple who earns a maximum of $12k (Income ceiling for EC), the loan they can stretch up to is about $700K which the property cost would be around $900k. This had half the loan buyers had the previous qualify for if they have no other outstanding loan.
The expected consequence for this MSR for EC is that it is likely to drive developers to adjust their selling prices, thus lowering their profit margin. The developer might look into other avenues to reduce the impact, such as the materials used for the projects and the sizes of the units that will be launched.
With government land sales prices going higher and higher, considering the construction cost and others, it would work out to be no less than $900psf. To make the units sold affordable, the units likely to be smaller than current. However, HDB had to stop building bigger units such as EA or EM and encourage buyers to head for EC if they are looking for larger units.
Would this contradict what had been advised?
It is encouraging to see that MND tried to make EC be in line with BTO policy, but still, there are still measures that shouldn’t be the same; in particular pegging the mortgage to MSR.
Nothing is perfect; let us hope that the market in 2014 will be more stable and sustainable.