Buying a property can bring pleasure to people.
However, it is also a major decision to be made when purchasing a private property as it involves a large sum of money. Usually, people would like to buy a private property with potential for capital appreciation, even though it is for their own stay.
Careful planning and considerations are essential in deciding the type of property to buy in order to suit your own purpose – whether for investment or own stay, for rental or capital appreciation, or in anticipation for en bloc sale?
The factors to consider between buying a private new launch and a resale property is discussed below.
Completion Time
The normal completion time for a resale property is 12 weeks. However, it can be expedited to 8 weeks with the agreement of the seller. Whereas, a new launch property will take a minimum of 2 years for the development to be constructed and obtain Temporary Occupation Permit (TOP) before it can be occupied.
Purchase Process Time
New Launch Timeline
Resale Timeline
For Own Stay
If you intend to buy for own stay, you must consider the urgency to vacate from your current residence or if you have a place to stay till you can move into your new buy.
If there is an urgency to move into your new property, a new launch will incur a rental cost of between $50,000 to $80,000 for a minimum period of 2 years while waiting for the completion of the property.
On the other hand, a resale property could be preferred as the completion of the sale process can be done within 8 weeks, plus a couple of weeks for some renovation if necessary.
Proper planning of such purchase can be done to allow for timely moving in.
For Investment
In the investment point of view, the mandatory minimum 25% down payment of the new launch property will not yield any returns for the subsequent 2 years or longer, depending on how long it takes till the property is constructed. On top of that, buyer must start servicing the monthly mortgage with the bank when the developer disburses the progressive payment, even before the unit is rented out.
On the contrary, resale property collect rent almost immediately upon the completion of sale. Furthermore, unlike new developments, the rental amount is predictable based on the data of existing rented units in the estate.
Capital Appreciation
source : Navis Group from OrangeTee
These two developments are located near to Bishan MRT Stations.
Source : SRX / URA
Sky Vue appreciated at 22% while Rafflesia appreciated by only a 6%.
Many of these studies have shown that over the past years, new launch properties have appreciated in capital more than the resale properties within the same vicinity.
Take a look at two other comparisons :
Source : SRX / URA
As these buyers bought the new launch properties directly from the developers at a preset entry price for different types of units. They will have an interest in preserving their entry prices, resulting in a definite capital appreciation of the property as they will never want to sell their properties at a loss (below the entry prices) in the future.
source : Navis Group from OrangeTee
Furthermore, when the developments obtained the Temporary Occupation Period, there are buyers willing to pay a higher price as they are able to view the finished products, while occupation can be almost immediate.
In fact, the newly launched property will be able to fetch a higher selling prices as compared to the older properties in the vicinity.
As the previous owners of resale property had gained profits from the selling prices, the margin of capital appreciation for this resale property will likely to be marginal when the subsequent owner sells it in the future.
Besides, aging property has lease decaying effect, which reduces property value due to remaining lease. It also poses difficulty for buyer to finance for its purchase.
The effects will be more pronounced in leasehold property and, consequently, hasten its decline in value.
Furthermore, when the resale property owner wants to sell the property in future, he will not only have to compete with the first-time owners within its estate for attractive prices to gain buyers, but also with the owners of other newer developments around.
Furthermore, it is also less probable in chancing upon an undervalued property in resale property than getting a great discount from developer at the earlier stage of a new launch property. Hence, more capital appreciation will be enjoyed by a new launch buyer as compared to a resale buyer.
Location
The location is a key factor in buying a property.
Location of the property could be so important that people are willing to give up some of their other demands to reside in their dream area.
Hence, the advantages and disadvantages of a location are often evaluated by the realtor, buyer and tenant. These considerations for a property location include the standard of living in the premise, amenities, connectivity to public transport, safety and security concerns, and importantly the potential return on investment of properties in the location.
Most of the time, good and mature locations are fully developed, leaving few plots for new launch private property to be constructed, unless there is an eb bloc project.
Buyers have limited choices in deciding which area to buy a property, but dependent on new plots released for private property development.
There are more choices for resale private properties, in terms of the location, the tenure (lease hold vs freehold) and the sizes of units available in the choice location.
Range for Unit Selection
Apart from good location, choosing a right unit is also important in terms of the design, facing, level and affordability. It is noteworthy to know that different units in the same development could fetch rents, hence, affecting the return on investment of the rental units.
Essentially, buying a right unit will not only yield higher rental, but also how soon in clinging a tenant.
New launch property offers the buyer a wider selection of units to choose from that development, though subjected to the balloting queue.
A resale property will depend very much on what are put up for sale at that moment.
Renovation Cost
Renovation can be an headache to some property owner, as it take time, money and energy in monitoring the renovation process. There are also buyers who love to tear down the entire unit and turn it into their dream homes.
A new launch property will usually come with the latest renovation design and material in its offerings, with some even provide options of colour, material or concept for buyers to select.
There is hardly any need to renovate the newly built unit, unless there is some peculiar reason to do so, like geomantic considerations.
Chances of hunting down a newly renovated resale apartments that matches your ideal style of structural and interior designs is very slim. Huge renovation cost could be incurred.
However, there are also buyers who preferred to select a resale property that suit their requirements and then spend on renovation to create a desired living space of their choices, instead of been bounded by the design of new launch properties.
Maintenance Costs
Although the MCST will upkeep the common communal space of a condominium through the maintenance or sinking funds, the owners will have to pay for the repair costs done within the interior of their units or landed properties.
Lower maintenance cost will be incurred in the interior of the new launch property as well as its communal space as compared to an older development. Newly completed property has a one-year defects free period, which developer is obliged to do up the defects. Besides, the equipment and facilities are new, which is an added advantage in attracting tenants.
Owner/landlord will have in the communal space of an older development, the ageing facilities may start to give problems, resulting in rising maintenance cost.
Consequently, the disruptions due to breakdowns of ageing systems in the development and the aesthetic of the older development may also affect tenants’ decision in renewing the lease or prospective tenants to bargain down the rent.
Potentially, depreciating the rental of this older resale property.
Summary
In summary, whether to go for a new launch or a resale private property will depend on the intention for the property to be purchased.
For new landlords, I will propose to go for resale property – less risky, availability of prevailing rental yields and estimate of capital appreciation, able to physically inspect the property and can rent out immediately.
Nevertheless, if the key intention is for capital appreciation, then I will suggest going for new launches, as its value have been shown to appreciate much more than the resales.
Ultimately, different buyers will have different intents and concerns in choosing a private property. It is imperative to carefully consider all factors before making that major decision.
For a non-obligatory discussion, call me @ +65 94742623.
Disclaimer
The material and information contained in the article and website is for general information purpose only. You should not rely upon the material or information on this article or website as a basis for making any property related, business, legal or any other decisions.
Whilst we endeavour to keep the information up to date and correct, We make no representations or warranties of any kind, express or implied about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services or related graphics contained on the website for any purpose. Any reliance you place on such material is therefore strictly at your own risk.
I am a Real Estate professional with proven records and 10 years’ experience in helping clients to acquire their dream homes and fulfilling their property investment goals. Skilled in facilitating purchase, sale and leasing of commercial, industrial, private residential and HDB properties, I enjoy my interactions with clients and find joys and sense of fulfillment whenever they found the properties that met their needs or when they benefited from their investments in the properties that I had helped them purchase.