Private Vs Executive Condo? Here are the fundamental Differences that You Must Know.
Updated: Nov 6, 2020
Has this question ever popped on your mind before? Or have you ever thought of being in a situation where you'll be asked to distinguish between these two? Oh No! Don't try to fall into the temptation of saying, "there is no difference."
Of course, there are, and that is what I'm about to tell you. But before we move further, you need to know that these two also share some compelling similarities.
Alright, So, what is an executive condominium?
The history of executive condominiums can be traced back to 1999. It was the government initiative to merge the public and private houses to form a hybrid. Nonetheless, the construction of these executive condos was handled by private entities. Moreover, the government sold the lands at a reduced rate making such housing very affordable.
Do you get the point now? OK, let’s look at what a private condominium is:
This is a private housing whereby individual portions of this land is owned by different owners. Besides that, common facilities in such condominiums are be co-owned by private individuals. Examples of these common facilities include elevator, lobbies, gardens, gym, hallways, etc.
Now, I’m about to break it down to you using a fictional identity called Rex:
Rex lives in a 4-room HDB flat and wants to move to a better apartment. So, he has two choices before him:
- Either to purchase a private condominium (resale) and give out the HDB on lease
- Or to buy an executive condo and sell the HDB completely
Now, follow me as we carefully analyse the outcome of the two choices.
Choice A: Purchase a private condominium (resale) and give out the HDB on lease
If Rex makes this choice, then, in 5 years, he would have gained about $X from the rent after subtracting other additional expenses (e.g., agent charges).
What is the worth of HDB 4-bedded room? Statistics from the past few years have indicated that HDB apartment reduces in worth as the lease approaches its date of expiry. Therefore, in the next 5 years, Rex's HDB flat would likely drop in its value.
What is the worth of reselling a private condo? Well, the answer here cannot be ascertained as there is no absolute control over what determines the value of reselling a private condominium.
Choice B: Purchase an executive condominium and sale the HDB
In contrast to choosing A, if Rex purchases an executive condo, it will attract a likely profit of $Y after five years. We are projecting a benefit here because of the cost margin between the EC and PC. Our assumed gain is obtained form the difference in price between the PC and EC (EC – PC).
Now let's analyse these two decisions from Rex to arrive at a more apparent difference between these two types of condominiums…
Choice A Vs. B? Which is the ideal financial judgment for James to make?
If Rex, however, decides to go with choice B over A, is he likely to make profit or loss? If we consider factors such as the possible increase in the worth of executive condominiums in 5 years together with the margin in cost between PCs and ECs, then Rex is likely to make a $(Y-X) profit.
Such amount, according to the profit and loss theory, is expected to be a positive value, and this might motivate him to go for an executive condominium instead.
Choice A Vs. B? Which will give him the opportunity to Own Extra Properties?
From another perspective; What if Rex goes for the executive condominium and forfeits the 4-room HDB? Then, there are chances for him to buy additional property in the long run, if he completes the MOP period. Why? Simple; at the end of the M.O.P, Rex, through equity term loan, will open the worth of his executive condo and this will enable him to buy a second personal property at his convenient time.
However, if he had purchased the private condo and rented-out his HDB, he might, in the long run, find it challenging to sell the HDB, which will highly depend on the remaining time for the lease to expire. Besides, he might not find it easy to open the value of the private condominium because the private property has been subsidised right from its foundation.
All these take us to the big question now; Executive Condominium or Private Condominium?
1. Costs: ECs can be cheaper (up to 20%) when compared to the PCs. Therefore, if we consider the housing grants that are present at the moment, then, it would be preferable for starters to opt for ECs first before going for PCs.
2. Comfort: Executive condominiums will provide better comfort to families and people living as a group. Besides, the prices are affordable due to government subsidies, and they are sited at a better location. Although it has its demerit (Minimum Occupancy Period MOP), most average-income earners should fit-in well in executive condominiums.
3. Long-term Investment: let’s say you’ve bought property earlier, and after some years, you need one that you can call your own, then it would be best to acquire a private condominium. Besides, if you decide to sell the private condo later, you can easily achieve that: unlike the executive condos where you have to abide by the minimum occupancy periods.
William Lee / Eileen Au
Ideal Home is well-liked by both local and international clients for their friendly yet professional approach in the way it goes about helping them with their real estate goals in Singapore. They welcome the opportunity to have a no-obligation chat with you to see how they can help you to achieve your real estate goals in Singapore.
Contact us today @ +65 8666 4333 (William) or +65 8686 4333 (Eileen).