Executive Condominium or EC will reach their Minimum Occupation Period (MOP) after 5 years and will be fully privatised after 10 years from TOP (Temporary Occupation Permit). If you are an EC owner, this means that at minimum, you can only sell your EC after 5 years. A question that many EC owners like to ask us, is that should they hold on for another 5 years for the EC to fully privatised before they sell their EC?
Unfortunately, we do not have a one size fits all answer. There is really no BEST TIME to selling your EC. For an EC to reach MOP, generally, there will already be a decent and substantial amount of capital gain as of today’s context. End of the day, it really sums down to what you want to achieve after selling your EC. i.e to invest in multiple properties or to move closer to parents or school.
Upon the time of writing, the EC above has just reached MOP 2 months ago and already recorded a gross median price growth rate of 37%.
Being on the ground, the reason for selling for most of EC owners usually fall into either of the 3 categories:
- Relocating to a preferred location
- Intention to capitalise on current EC
- Planning to reinvest to multiple properties
Relocating To A Preferred Location
As most of the ECs are not extremely viable in terms of location, some owners may feel the need to relocate to their preferred location such as nearer to parents or work places, nearer to amenities such as MRTs or shopping malls etc.
For sellers with kids, they may be planning to move within 1km from the desired primary school for their child.
Intention To Capitalise On Current Property Proceeds
Upon MOP, EC owners are already sitting on a substantial amount of proceeds. Some owners may choose to cash out, locking in their paper gain and purchase another property at their desired location with the proceeds as down-payment. The balance of the proceeds are kept as savings or to invest in other investment channels.
Planning To Reinvest To Multiple Properties
For those who are more investment savvy, they may choose to purchase 2 properties after selling, one for home stay and the other for investment, with each owner owning one of them respectively. By selling away their jointly owned EC, and purchasing one property each, it is also a good way to avoid paying absd when purchasing a 2nd property.
Why Some Owners May Feel That It Is Better to Sell an EC After Fully Privatised
- Higher Selling Price?
- Increase pool of buyer = Increase Demand?
This was usually the case whereby ECs generally reap a higher selling price and profits for the past ECs until recently. Two of the latest EC, La Casa and The Quintet, that has reached their 10 year mark has reflected otherwise.
Does a Fully Privatised EC Always Commands a Higher Selling Price?
Well. we would say yes and no. There will be various factors determining this factor, such as location, competitions around the area, upcoming developments and most importantly the property market sentiments and economical outlook.
The pioneer batches of ECs launched during the 1999 and 2000 were sitting on losses upon MOP on the 5th year (Year 2004 to 2005). The launch was around the peak of the property cycle, after which followed by the the 1998 Asian Financial Crisis. Subsequently, with the strong upturn economically in 2009, property prices start climbing allowing the ECs owners then to start profiting from their EC purchase. Let us look at one example below, Simei Green Condominium TOP 1999
Another example, the most recent EC that have passed the 10 year mark, La Casa’s TOP was around 1Q 2008 and owners are able to sell their units after 5 years upon fulfilling the MOP on 2013, which was the peak of a property cycle. Base on the chart below, we did not see any significant increase upon their 10th year, 2018. In fact, the average prices are even lower than that when they just MOP.
As EC launch price differs and increased over the years (from ~400psf to over ~1000 psf today), and at the same time taking market and economy conditions into consideration, it is extremely difficult to have an apple to apple comparison as to whether an EC will definitely be more well worthy to sell upon MOP or after full privatised. However, what we can take note of, is that market and economy conditions certainly plays a huge part in determining a better time to sell.
Difference In Buyers Profile
The only difference in the pool of buyers is that you can only sell to foreigners after the 10-year mark. However, foreigners may be deterred away with the requirement of Additional Buyer Stamp Duty of 20%. Generally, resale ECs are still more sought after by locals and Permanent Residences.
Should You Wait Until Your EC Fully Privatised?
As we had discussed above, there are no direct comparative evidence or data as to whether holding until the 10th year will reap you a higher profit. In general, a high percentage of ECs does appreciate further over a longer span of 10 years. Despite this, the profitability of an EC very much depends on market trends and situations as to when the EC is launched, when it reached the 5-year mark as well as when it fully privatised.
To hold an EC until it is fully privatised may or may not reap you a higher selling price. But the additional 5 years waiting for the privatisation may incur opportunity cost. Due to a higher age, loan amount for your next property may become lesser after 5 years. At the same time, the CPF accrued interest accumulated may rip off a portion of the cash proceeds as well.
Some Points to Consider whether to Sell Your EC after 5 years or 10 years
- Do you need to sell your EC to cater to other needs and preferences?
- Opportunity costs from 5th to 10th year?
- Is your next property’s projected return comparable or higher?
- Is it economically favourable to sell and reap a substantial amount of return on the 5th year?
Another Approach: To Keep your EC and Invest in Another Property?
Well, there is another approach for sentimental owners who prefer to hold on to their EC or for owners whom don’t see any needs to change an environment.
A more direct and less complicated way will be to purchase the 2nd property directly and pay the ABSD of 12%. Take note that there will be CPF usage limitations if both of your CPF are utilised for the EC.
Another method, which is more strategic, will be to decouple on the first property, at this instance, the EC. Subsequently, the outgoing party can purchase another property without paying the hefty 12% ABSD. Of course, legal fees will be higher and the process will take slightly longer with the additional step.
In general, there isn’t any distinctive indication as to which is the winner, whether selling EC after 5 years or after 10 years. We guess a more important deciding factor is your family plans and objective base on your needs or wants. For example, if you are a “Menicius’s Mother” (Meng Mu) intending to move for your child’s primary school, the chance of you holding on to the EC for another 5 year will be lesser.
Ideally, you can speak to professional agents to understand more on the best time to start selling as well as to have a deeper understanding on the pros and cons for selling either upon MOP or upon fully privatised.