Tuesday, January 8, 2013

Need for a cap on EC's price

The 2 million price tag on the recent executive condominium (EC) for the sandwiched class, shows that the developers are somehow again finding ways to circumvent the rules, once again. They did it for DBSS, and now they are doing it for ECs.

Again, we always need to go back to the fundamental reason behind building ECs. Who is it for? Is there a great demand for it? If the answers to both questions are yes, then why allow the developers to create penthouses with such sky high prices when you can build maybe 2 units with more affordable pricing with that space?

I think the time has come to introduce an absolute cap to the price of an EC so as to let developers know the reasons behind building ECs. Since the ECs are built by HDB, what better way to introduce a cap than to use the maximum loan for the HDB concessionary housing loan as a basis for the cap. For example, if the household income is $10,000 a month, the maximum loan will be about $882,000 with a repayment period of 25 years. That would put the maximum price of a EC unit to slightly less than 1 million.

Personally, I find that is an acceptable maximum price of an EC because let's not forget the reason behind building ECs. It's for the families who are not able to afford private housing, but are not eligible for HDB flats. If they can afford to pay $2 million, then they can afford to buy private housing. Leave ECs to the families who really need them.

Let's also not forget about financial prudence, and not make the same mistakes the United States made in the Great Recession of 2007-2008. Be certain that you're buying a unit that you can afford. As ECs are headed by a government unit, it should also reflect this ethos.

Otherwise, why HDB should build ECs? Might as well leave it to the private sector since it seems to be as expensive as private condominiums.

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