Sunday, August 5, 2012

ECs enjoy pricing edge over condos

Straits Times: Sat, Aug 04

LOWER construction costs have given executive condominiums (ECs) a pricing edge as developers chase buyers in a competitive market.

Cheaper building expenses mean firms can pitch the units at levels below that of private apartments, but that initial price gap narrows as an EC gets closer to completing its minimum occupancy period and resale restrictions ease.

ECs - an upmarket hybrid of public and private housing - can be built for about 22 per cent cheaper than their private counterparts, according to a sample of projects studied by Square Foot Research. This lower cost is partly why EC projects are typically priced about 25 per cent below comparable private mass market homes, experts say.

This discount also takes into account the Housing Board (HDB) rules and household income cap of $12,000 a month that apply to EC units. Such factors are priced in by developers and often mean an initial lower land cost.

Square Foot Research looked at six EC projects and found the average construction cost was $209 per sq ft (psf) per plot ratio (ppr) - well under the average of $256 psf ppr for nine recently launched mass market private developments that it also studied.

The construction cost - derived from disclosures from listed contractors - does not include costs from piling work and typically reflects a project's features and furnishings.

ECs often have fewer frills while private projects tend to differentiate themselves from others in terms of architectural design and extra facilities.

Chris International director Chris Koh noted that the gap in construction costs could also be due to ECs opting for multi-storey carparks rather than the more expensive basement ones.

Take the Arc at Tampines, an EC with 574 units. It has a seven-storey carpark with 574 parking spaces while private condo Waterview just around the corner has a basement carpark with 744 spaces for residents of its 696 flats.

The initial price gap that ECs enjoy over private homes starts to narrow as an EC heads towards its five- and 10-year mark, experts note.

Like HDB flats, ECs are subject to a minimum occupation period of five years. After that, they can be sold only to Singaporeans and permanent residents. They become private property after 10 years and then can be sold to foreigners.

The price difference between private project Rafflesia and nearby EC Bishan Loft narrowed to 7 per cent in June, while it shrank to just 6 per cent for private project Eastpoint Green and EC Simei Green.

Experts pointed out various other possible differences between ECs and private residential projects but these are usually small and not of huge significance.

For instance, the fittings and furnishings - floor tiles, kitchen appliances and sanitary ware - are typically of a lower grade in ECs.

Square Foot Research director Ooi Yi Tung noted: "For example, the marble used to furnish a unit might be from China rather than Italy. Other furnishings within the apartment might also be of a lower grade."

EL Development managing director Lim Yew Soon said private condos might opt for branded European appliances while ECs could use lower-grade appliances although they might not necessarily be of poorer quality. He offered an analogy. "It's like opting between a Toyota and Lexus. Both are actually still good cars.

"But when contractors tender for an EC project, they might factor in a discount and a lower bud-get because the perception is for ECs to be more basic."

The aesthetics of the project might also differ, with private projects having "more flair" - for instance, more curvature in its external design or a swanky clubhouse - that would cost more to build.

The chief operating officer of a listed contractor, who declined to be named, said developers and architects are aware that EC buyers are more cost-conscious and thus try to keep the end product affordable.

"Construction costs can be reduced a bit here and there to make EC units more affordable.

"Less aluminium and glass cladding might be used for a building's exterior, or the lift lobby might have a tile finish rather than marble, but it doesn't really affect the actual unit that much," he said.

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