PRICE MOVEMENTS OF EXECUTIVE CONDOMINIUMS

Abstract

Executive Condominiums (ECs) are launched in Singapore in order to cater to the middle-class households. ECs are similar to Private Condominiums (PCs) except with restrictions to property rights in order to dampen speculative and investment interests. These property rights restrictions include the restriction on the homeowners’ ability to dispose of the condominium and the prohibition of the resale of these condominiums to foreigners, until after the tenth year. However, issues emerge as ECs are considered a good investment due to the discounted prices as compared to PCs which results in inequity that the lower income group are getting less subsidies. This study aims to find the price differentials of ECs and PCs across different time periods and whether ECs and PCs prices will eventually converge. This study discovered that due to these restrictions, new ECs are priced at a 5.2% discount as compared to PCs. This discount is reduced to 2.8% from Year 5 to 10, and 1.7% from Year 10 to 15, even after ECs legally transition to become PCs. With the 5.2% discount, with an additional of up to 3.5% of HDB grants, EC buyers effectively pays 8.7% less than PC buyers. Furthermore, we found that it is only after 20 years when EC prices converge fully to PC prices. These results indicate pricing inefficiency in the EC housing market of up to ten years after the privatisation of ECs and suggest that there is strong evidence of “sticky” prices amongst EC and PC groups separately.