Land prices for Executive Condominium (EC) sites went through the roof in July 2013 when the tender for the first EC site in Jurong closed.
The site saw enthusiastic participation from developers and attracted a top bid of $418.53 psf ppr. The breakeven price is estimated to be between $700 and $750 psf. This means that to maintain their profit margin, the developer has to launch the project at around $840 psf.
This estimated selling price is another record for EC. No EC launches has ever crossed the $800 psf mark. Sea Horizon at Pasir Ris will test that when it opens for e-apps in August 2013.
At this selling price, is EC still affordable to the first timer families earning up to $12,000 a month?
Assuming an average unit size of a 3-bedder to be 1,100 sq ft and a unit price of $850 psf, the price will be $935,000. The couple will need cash and CPF amounting to $187,000 for the 20% downpayment. This is not a small amount.
We further assume that the loan amount is 80% of $935,000, an interest rate of 1.5% and a loan tenure of 30 years. The monthly mortgage payment works out to be $2,582.
If the couple earns a combined income of $12,000 a month, they will contribute $2,100 to their CPF Ordinary Account (OA). This means they have to come up with cash of $482 every month. If the interest rate goes up, they have to cough up more cash monthly.
Another point of concern is the CPF monies for retirement. As all their CPF monies have been used to service the loan, their OA is likely to stay near zero until they repay their loan or they cash out and buy another property.
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