What the latest cooling measures mean for ECs

Cautious bidding for EC sites loom.

According to Knight Frank, pent up demand for ECs is expected to slow as EC homebuyers expect more sweeteners to be dangled by developers to offset any potential increase in transaction cost.

Here's more from Knight Frank:

Given the unsold inventory and future supply of about 8,700 EC units (including the estimated EC units under the 1H2013 GLS Programme), competition amongst developers is likely to be strong, as they have to create other innovative ways to attract buyers.

Some of the features offered by developers include quality finishing, attractive common facilities, price rebates and other perks.

Lower EC land bids: Cautious bidding for EC sites can be expected as developers anticipate slow demand from the market as well as thinner profit margins arising from the reclassification of private enclosed spaces and private roof terraces treated as gross floor area.

The delay in the launched date for sales 15 months from the date of award of the sites or after the physical completion of foundation works will increase the level of uncertainty for developers. Assumptions for bidding may turn conservative translating to lower bid prices.

Softer sale prices if land bid prices fall: EC prices are likely to hold in the coming few months. Softer prices can be expected if lower land bids for EC sites are recorded for those that are affected by the latest measures.

In addition, the maximum unit size restriction imposed on EC developments serves to ensure that the overall price quantum of one EC home remains affordable for the sandwiched class. With prices kept at affordable levels, demand for ECs is expected to remain stable.