Should you buy an EC or a resale flat?


The prices of the top, centrally located resale flats can match those of Executive Condominiums (ECs). A resale flat near Toa Payoh Central, for example, can reach up to $700 per square foot at present. At total prices that range between $600,000 to $700,000, some resale flats come close to the price of a new EC. This has led some to wonder which of the two they should pick. Here’s how to look at it:

The main differences between an EC and a resale flat

The main differences can be summarised as follows:

  • ECs will be fully privatised after 10 years
  • ECs are full suite condos
  • Older resale flats tend to be in more built-up areas
  • There is Cash Over Valuation for resale flats
  • HDB loans can be used for resale flats


  1. ECs will be fully privatised after 10 years

One of the key selling points of ECs is that, after 10 years, they will be fully privatised. Anyone can buy them, from foreigners to corporate entities. Resale flats, however, remain HDB properties through to the end of their 99-year lease.

Private homes are easier to sell at a good price, due to lower restrictions. For example, foreigners cannot buy resale flats, and even Permanent Residents (PRs) must wait three years before they can buy one. An EC, upon privatisation, can be sold to a wider market with no such limitations.

  1. ECs are full suite condos

ECs are built by private developers and are also marketed by them (this last part is important. Developers are inclined to put in a good effort, as they are responsible for selling the units themselves).

ECs are full suite condos, which means they come with all the expected facilities such as a private pool, gym, private security, and so forth. Now over the decades, housing estates have narrowed the gap somewhat, and many older ones would also have communal facilities like gyms and gardens.

However, EC facilities tend to be more upmarket, and are shared by fewer residents. If this appeals to you, an EC may be a better choice.

  1. Older resale flats tend to be in more built-up areas

In a broad sense, a resale flat at a price of $600,000 to $700,000 will be centrally located, or in a mature district. An EC at close to the same price range, however (say $700,000 to $800,000), may be in a less mature or less central area.

This raises the issue of nearby amenities. More expensive resale flats tend to be situated near the neighbourhood mall, next to the MRT station, close to entertainment outlets like cinemas, and so forth. Marine Parade and Queenstown, for instance, have been so built up over the years that residents can stay in their neighbourhood for months, never go to town, and still not get bored.

Now we don’t want to bad mouth any specific developments or neighbourhoods, but the fact is that new ECs in areas like Punggol or Choa Chu Kang probably won’t have the amenities to match. And when it comes to location, it’s a toss-up as to whether their exclusivity makes up for not being as central.

  1. There is Cash Over Valuation for resale flats

The Cash Over Valuation (COV) portion of resale flats is revealed only after the final price is agreed upon, and the Option to Purchase (OTP). Note that the COV is not covered under the bank or HDB loan, and must be paid in cash.

Now, this is unlikely to happen if you negotiate a reasonable price (use the surrounding unit prices as a guide). However, it is a possibility with resale flats. With ECs however, you know exactly how much you’ll have to pay in cash beforehand.

  1. HDB loans can be used for resale flats

Note that HDB Concessionary Loans cannot be used for ECs. You will have to get a private bank loan. This makes a difference in the down payment required.

An HDB loan can cover up to 90 percent of the property price or valuation (whichever is lower). Of the remaining 10 percent, the money can come from a combination of cash and CPF. If you have sufficient funds in your CPF, this can mean a zero dollar down payment.

A private bank loan can only cover up to 80 percent of the property price or valuation (whichever is lower). Of the remaining down payment, 15 percent can come from a combination of cash and CPF, while an absolute minimum of five percent must be paid in cash.

Hence, for an $800,000 EC, you must be ready to pay a minimum of $40,000 in cash.

One happy advantage of a bank loan, however, is that it’s been cheaper than a HDB loan for a long time (an average of 1.8 per cent per annum, as opposed to HDB’s 2.6 per cent per annum).

For more details on getting an affordable bank loan for ECs, speak to one of Keyquest’s mortgage experts. We’ll also help you through the paperwork, and find the best solution for your housing loan.

So which of the two should you buy?

To keep things simple, a home buyer should consider two things.

The first is whether the resale value matters. If you intend to stay in the property for most or even the rest of your life, then it may be irrelevant that an EC is privatised after 10 years; you are not thinking of selling anyway. Instead, you should focus on whether the amenities and facilities make you comfortable.

If you are thinking of upgrading to a fancier house later in life, however, you might want to consider the EC as it’s a better “stepping stone” to more luxurious properties.

The other thing to consider is the down payment. Before buying an EC, brace for the possibility of having to pay more in cash. Besides the minimum of five percent, remember that banks do not necessarily have to loan you the full 80 per cent (it can vary based on things like your credit score). Again, speak to one of our mortgage experts for help on this.

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