MND Refines EC Housing Scheme
SINGAPORE: The government has introduced three measures to refine its Executive Condominium Housing Scheme.
“The government will implement three measures for Executive Condominium (EC) developments to bring the terms for ECs closer to that for public housing, and help support a stable and sustainable EC market,” said a Ministry of National Development (MND) statement on Monday.
Reduce EC Cancellation Fee
The cancellation fee for ECs will be reduced from 20% to 5% of the purchase price. This will relieve the financial burden of buyers who have to cancel their EC bookings after signing the Sale & Purchase Agreement.
The new cancellation fee will be applied to EC land sales which are launched on or after 9 December 2013, including those where the tenders have not closed.
The cancellation fee for ECs is currently set at 20% of the purchase price, similar to those for private housing.
However, unlike buyers of private housing, buyers of EC units cannot sub-sell their units if they cannot complete their purchase, and have to pay the cancellation fee.
This has especially imposed significant financial burden on young couples who subsequently are not able to proceed with their marriage and hence the EC purchase.
The reduction will align the cancellation fee for EC units with that for HDB Build-to-Order (BTO) flats.
Resale Levy for Second-Timer Applicants
Second-timer applicants who buy EC units directly from property developers will have to pay a resale levy, similar to second-timer applicants who buy BTO flats.
The levy will range from S$15,000 to S$50,000 depending on the flat type of their first HDB property.
The new requirement will be applied to EC land sales which are launched on or after 9 December 2013, including those where the tenders have not closed.
Currently, second-timer applicants who buy EC units directly from property developers benefit from the lower EC prices arising from the initial eligibility and ownership restrictions imposed on EC purchases.
However, they do not need to pay a resale levy. The alignment of treatment with second-timer applicants who buy BTO flats will ensure greater parity.
Revision of Mortgage Loan Terms
The Monetary Authority of Singapore (MAS) will cap the Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions for EC units bought directly from property developers at 30% of a borrower’s gross monthly income.
This is in line with earlier measures introduced by the HDB and MAS to encourage financial prudence among buyers of public housing.
It discourages EC buyers from over-stretching their finances and supports an affordable and sustainable EC market.
The 30% MSR cap will apply to EC purchases where the Option to Purchase is granted on or after 10 December 2013.
Previously, only the total debt servicing ratio rules apply to EC buyers, where up to 60 per cent of household income can be used to repay a mortgage for a new home purchase, over a maximum period of 30 years.
With these measures in mind, analysts expect developers to be more cautious with land bids and demand for ECs may moderate.