http://www.tremeritus.com/2012/12/30/bus...m-ec-unit/
Businessman father helps young couple buy $2.05M EC unit
December 30th, 2012 | Author: Editorial
CityLife EC
It was reported that an executive condominium (EC) penthouse was sold for a record price of $2.05 million, about an hour after the project launch yesterday (29 Dec) (‘EC penthouse sold for record $2.05M an hour after launch‘).
A spokesman for the CityLife@Tampines project said the sale was made just after 11am, an hour after the sales office opened at 10am.
The buyers are a young married couple in their mid-20s. Apparently, the $2.05 million unit was mainly paid for by the man’s father, Mr Koh, a 56-year-old businessman.
Mr Koh said in Mandarin, “My son can’t afford it, he’s only a salaried employee.”
Mr Koh told reporters that he would pay the bulk of the amount. He said he owns several other private properties. The man’s sister said, “We’re just a middle-class family.”
Mr Adrian Teo, 40, who runs his own social media and marketing company, bought a 2,691 sq ft five-bedroom skysuite for about $1.5 million.
Housewife Tan Pei Ling and her husband, both 39, bought a 1,432 sq ft four-bedroom unit for $1.17 million. The husband is a teacher. Ms Tan told the reporter, “There is very good resale potential because of the MRT and upcoming Tampines Hub.”
She said they will finance the purchase with proceeds from the impending sale of her current property, a five-room HDB flat in Tampines which is already fully paid for.
Looking at data from HDB [Link], the median sale price of 5-room HDB flats in Tampines is roughly $536,000. Hence, at $1.17 million, on average, Ms Tan will have to raise another $600K+ for the new EC unit after selling her 5-room flat. She will no doubt have to borrow from the bank again and be in debt for the next 20 to 30 years.
ECs are supposed to be a public-private housing hybrid and were introduced to meet the demands of the so-called “sandwiched class” who do not qualify for public housing but find private property beyond their reach. As it is, ECs appear to be highly priced.
To qualify for an EC, the applicants’ average gross monthly household income must not exceed $12,000 under HDB rules. Taking $12,000 as household income, at $2.05 million, the Price-to-Income Ratio, otherwise known as the Affordability Ratio (i.e, price of the house over the annual income), is 14.2. Even at $1 million, the Price-to-Income Ratio works out to be about 7. The World Bank considers a ratio of 5 or under as affordable for local residents, while the United Nations have set the standard lower, at 3 (see also Link).
Anything above 5 is considered not affordable and a ratio over 10 is surely madness.
Unless someone has rich parents to help pay for the “unaffordable” ECs, most buyer will have to resort to borrowing from a bank, putting one in debt for 20 to 30 years. If there is a financial crisis and one loses his job or interest rate moves up sharply, and as a result, one defaults on the mortgage payments, the bank will have no mercy and move relentlessly to repossess the home. And if the money owed to the bank cannot be met after selling the house in the open market, the buyers will be bankrupted by the bank.
Let us not wish such a circumstance on anyone in Singapore.
Nevertheless, CityLife proudly announced that all the skysuites and penthouses were snapped up by noon, and by the end of the first day of launch, 65% of the units had been sold.