Why The $16,000 Income Ceiling For Executive Condos Is Too Low

Published 1 December 2024, 2:00 PM SGT · 5 min read · 1k

The minimum down payment on an EC can be more than 25 per cent.

Consider this: as of 2024, ECs have an income ceiling of $16,000 per month. Now along with this income ceiling, there’s a Mortgage Servicing Ratio (MSR) that caps the monthly loan repayment to 30 per cent of your monthly income.

(There’s also a Total Debt Servicing Ratio, or TDSR, that caps it to 55 per cent of your monthly income inclusive of other debts; but if you have so many big outstanding loans that this becomes a serious issue then ah…maybe now’s not the time to buy a property)

Now let’s take, for example, Lumina Grand - the first EC launch in 2024. The average price given at launch was $1,464 psf.

Let’s say you buy a 1,152 sq ft. unit. That’s a bit bigger than a 4-room flat, which is usually around 960+ sq. ft.

At $1,464 psf, the price tag comes to $1,686,528. This means the maximum amount you can borrow (75 per cent) is $1,264,896.

Over a period of 25 years (let’s assume you get maximum loan tenure), and at the floor rate of four per cent* per annum, the likely loan repayment amount is about $6,677 per month. To meet the MSR, this must be no more than 30 per cent of the borrowers’ income - so that means they would need to bring in about $22,256 per month; perhaps a bit more.

*It doesn’t matter if your actual loan interest rate is lower. Four per cent is the floor rate used to calculate MSR and TDSR for a bank loan (and there’s no HDB loan for ECs)

But the income ceiling is $16,000

See the issue yet?

With $16,000 per month, monthly loan repayments can’t exceed $4,800 per month. Anything above that, and you need to make a bigger down payment. In our above example, the maximum loan amount would have to fall to about $909,000+, for the monthly loan repayments to drop to around $4,800.

(Also bear in mind this assumes a 25-year loan tenure, which not every buyer is young enough to get.)

You could, of course, go for a smaller unit and hope to qualify; but EC buyers are, by nature of eligibility requirements, almost entirely family buyers (many ECs don’t even have two-bedders, barring some like Ola). Or if you’re an upgrader, the sale proceeds from your previous flat will help with a bigger down payment; that’s why many see their flats as a stepping stone to an EC in about five years.

But we are drifting further from the likelihood of first-time home buyers being able to afford an EC right from the get-go; and maybe to a situation where more buyers need parental support (i.e., the forgiving bank of mum and dad) to get an EC as a home.

A time is coming when we may need to raise the income ceiling further for ECs, or else somehow lower developer prices; and the latter seems unlikely, as there are certain realities regarding land prices and construction costs.

But demand remains - probably because there’s a smaller gap between ECs and condos in many minds today

We’ve moved past the previous attitude that “your EC can never be worth as much as my private condo.” This is partly due to the many improvements we’ve seen in the EC segment. Over the past decade, we’ve seen more ECs within walking distance of MRT stations (here are at least 26 of them), and we’ll probably see even more as the train network expands.

Many of the old allegations and rumours, such as developers taking “shortcuts” or using “lousy builders” to work with ECs’ tighter budgets, have started to fade. Quite often, we come across buyers who don’t even know they’re looking at an EC until we inform them.

The 10-year mark to get to full privatisation is also less relevant in buyers’ minds. By now, the market has seen that foreigners and entities are more interested in prime, luxury condos anyway; and that’s doubly true with the higher ABSD rates they face. So from a practical standpoint, an EC doesn’t need to reach past the 10th year to fully unlock its resale potential - five years is more than enough.

In light of this, perhaps buyers won’t mind needing that bigger down payment on an EC today. But if you do want one, you’re going to save more aggressively than the buyers from earlier decades.

Meanwhile in other property news…

Here are the cheapest HDB maisonettes you can buy in 2024; still well under $1 million, thankfully.
What are the most profitable resale condos so far in 2024? They’re on this list and congrats to the seller who made $1 million in eight years.
I admit it. Back when Hundred Palms Residences was launched, I rolled my eyes at the hype and the long queues. I was wrong. It’s one of two ECs with astonishing profits for those who managed to get an early sale.
Looking for decent dual-key units for extended family, or a tenant? Here are some solid options for 2024.

Weekly Sales Roundup (18 November - 24 November)

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Top 5 Most Expensive New Sales (By Project)

PROJECT NAME	PRICE S$	AREA (SQFT)	$PSF	TENURE
32 GILSTEAD	$14,440,000	4209	$3,431	FH
THE RESERVE RESIDENCES	$7,823,020	2519	$3,106	99 yrs
WATTEN HOUSE	$5,090,000	1539	$3,307	FH
TEMBUSU GRAND	$4,244,000	1711	$2,480	99 yrs (2022)
NAVA GROVE	$4,146,900	1722	$2,408	99 yrs (2024)

Top 5 Cheapest New Sales (By Project)

PROJECT NAME	PRICE S$	AREA (SQFT)	$PSF	TENURE
THE COLLECTIVE AT ONE SOPHIA	$1,149,000	431	$2,669	99 years
EMERALD OF KATONG	$1,240,000	484	$2,560	99 years
LENTORIA	$1,322,000	538	$2,456	99 yrs (2022)
THE LAKEGARDEN RESIDENCES	$1,331,900	527	$2,525	99 yrs (2023)
NAVA GROVE	$1,474,500	624	$2,362	99 yrs (2024)

Top 5 Most Expensive Resale

PROJECT NAME	PRICE S$	AREA (SQFT)	$PSF	TENURE
TOMLINSON HEIGHTS	$8,250,000	2745	$3,006	FH
GALLOP GABLES	$6,138,000	2669	$2,299	FH
VENTUNO BALMORAL	$6,000,000	3886	$1,544	FH
ST THOMAS SUITES	$5,800,000	2605	$2,227	FH
TRILIGHT	$5,010,000	2099	$2,387	FH

Top 5 Cheapest Resale

PROJECT NAME	PRICE S$	AREA (SQFT)	$PSF	TENURE
TREASURES @ G20	$610,000	452	$1,349	FH
THE COTZ	$705,000	452	$1,559	FH
RV POINT	$758,998	355	$2,137	999 yrs (1841)
SIMS EDGE	$780,000	409	$1,907	FH
HERITAGE EAST	$785,000	463	$1,696	FH

Top 5 Biggest Winners

PROJECT NAME	PRICE S$	AREA (SQFT)	$PSF	RETURNS	HOLDING PERIOD
GOLDENHILL PARK CONDOMINIUM	$3,430,000	1539	$2,228	$2,290,000	24 Years
PEBBLE BAY	$3,200,000	1894	$1,689	$1,931,920	26 Years
PAVILION 11	$3,080,000	1485	$2,073	$1,772,000	18 Years
MANDARIN GARDENS	$2,530,000	2013	$1,257	$1,730,000	24 Years
N.A.	$2,450,000	1335	$1,836	$1,660,000	24 Years

Top 5 Biggest Losers

PROJECT NAME	PRICE S$	AREA (SQFT)	$PSF	RETURNS	HOLDING PERIOD
THE OCEANFRONT @ SENTOSA COVE	$4,700,000	2831	$1,660	-$1,103,410	18 Years
TOMLINSON HEIGHTS	$8,250,000	2745	$3,006	-$603,190	14 Years
FORESQUE RESIDENCES	$1,975,000	1690	$1,169	-$176,300	11 Years
LIV ON WILKIE	$1,212,000	549	$2,208	-$136,800	10 Years
REFLECTIONS AT KEPPEL BAY	$2,525,000	1421	$1,777	-$84,100	17 Years

Transaction Breakdown

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If you'd like to discuss how this applies to your own circumstances, you can reach out for a one-to-one consultation here.

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Frequently asked questions

Why is the $16,000 income ceiling for executive condos considered too low?

The income ceiling of $16,000 per month limits buyers' ability to qualify for loans, as monthly repayments can be higher than what this income allows, especially when considering mortgage ratios. This restricts many potential buyers from purchasing ECs.

How does the mortgage servicing ratio affect EC buyers with a $16,000 income ceiling?

The Mortgage Servicing Ratio caps monthly loan repayments at 30% of income, which for a $16,000 income means repayments should not exceed about $4,800. This limits the maximum loan amount and can make it difficult to afford certain EC units.

What are the implications of the current income ceiling on first-time home buyers interested in ECs?

The $16,000 income ceiling makes it challenging for first-time buyers to qualify for EC loans, especially for larger units or those with higher prices, potentially requiring parental support or saving for larger down payments.

Are there any suggestions or considerations for future changes to EC income limits?

The article suggests that the income ceiling for ECs may need to be raised or developer prices lowered in the future to accommodate more buyers, as current restrictions limit affordability.

How have perceptions of ECs changed over time according to the article?

Perceptions have improved, with ECs now seen as more comparable to private condos due to better locations, fewer rumors of shortcuts, and increased interest from buyers, making ECs more attractive.

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Ryan J. Ong

Partner at Stacked

A seasoned content strategist with over 17 years in the real estate and financial journalism sectors, Ryan has built a reputation for transforming complex industry jargon into accessible knowledge. With a track record of writing and editing for leading financial platforms and publications, Ryan’s expertise has been recognised across various media outlets. His role as a former content editor for 99.co and a co-host for CNA 938’s Open House programme underscores his commitment to providing valuable insights into the property market.