Even with the recent rise in interest rates, HDB ECs are still popular and a great housing option. With down payments of 25%, they’re cheaper than private condos and are perfect for first-time buyers. But what’s the catch? You have to pay at least 25 percent of the total purchase price as down payment. If you’re not ready to make this kind of down payment, ECs may not be for you.
ECs are cheaper than private condos
If you’re looking to buy a new home but don’t have the cash to pay for the full purchase price, you should consider buying an EC instead. While private condos are freehold, ECs are sold at a discount, often 30% or more lower than the price of a private condo. In addition, HDB offers a grant to EC buyers if they meet certain criteria.
However, ECs are not for everyone. To purchase an EC, you must be a Singaporean or permanent resident for at least five years. This is to avoid property speculation. Furthermore, you cannot rent your EC out for the first five years of MOP. ECs are only sold to Singapore citizens or PRs.
They require a down payment of at least 25%
In order to buy an HDB EC, you need to make a down payment of at least 25%. The down payment can come from your own pocket or your CPF savings, but it must be cash. For instance, if you’re planning to buy a $1 million EC, you’ll need to put down a down payment of $50,000 in cash. It’s also important to factor in the Mortgage Servicing Ratio when calculating how much you can afford to spend on the downpayment.
Another option is to take out a bank loan. Bank loans come with very low interest rates (the maximum is 2.5% for an HDB EC), but they require a minimum cash down payment of 25%. This method is ideal for those who have enough cash to put down a large down payment.
They are a viable investment option despite rise in interest rates
Despite the recent rise in interest rates, HDB ECs remain a good investment choice for those who want to own a property and enjoy high capital appreciation. If you buy an EC at the right time, you will stand a higher chance of maximizing your capital appreciation. While the current interest rate floor is low, rising interest rates will require a reassessment of your eligibility. As such, a high degree of knowledge in interest rates, repricing and loan packages is recommended for HDB EC owners.
Even though HDB ECs are a good investment option despite rise in interest rates, it is important to remember that it requires a higher net holding cost. This is because you cannot rent out the entire unit for the first 5 years. However, the rental income from the EC unit can help you offset your mortgage repayments.
They are a good housing option for first-time buyers
If you are a first-time buyer, HDB ECs are a good choice as they are cheaper than private condos. However, there are certain conditions you must meet before purchasing an EC. These include not renting the property during the first five years. You should also check whether you can avail of the CPF housing grants.
For an HDB EC, you must have at least $221,250 cash to purchase it. This is because you cannot finance the EC through an HDB loan. If you have a CPF OA account, you can contribute to your down payment. Otherwise, you need to apply for a bank loan. Your bank loan must also meet the requirements of the Mortgage Servicing Ratio (MSR) and Total Debt Servicing (TDSR).
They are less affected by higher ABSD
The government has announced that higher ABSD for second and third homes will not affect HDB ECs. However, the new ABSD rates for first-time buyers will increase the ABSD rate on the new home by at least 17 per cent. This means that foreigners who want to buy HDB ECs would be hesitant to do so at this stage. The government has also made certain changes to HDB ECs, including lowering the LTV limit to 85%.
Before ABSD rates rise, EC prices catch up with those of private condos. The average price gap between ECs and private condos is 20 per cent, but the gap narrows to around 5% and 10% by the time of privatisation. This makes it easier for Singaporeans, PRs, foreigners and private companies to purchase ECs.