When it comes to purchasing a condo in Singapore, one of the most popular debates would be: New Launch or Resale Condos?
The best way to answer this question is to assess your own needs and objectives: Are you purchasing for own stay or investment? If you are purchasing for own stay, do you need the property immediately or can you afford to wait for a few years?
Most of the time, the decision really depends on your urgency. For example, some would have already sold their current property and need a unit immediately. In that case, a resale condo would be the better option. On the other hand, if Return on Investment (ROI) is your main priority, and whether if the unit is ready-to-move-in or that it will only be ready in the next 5 years does not really matter, then you are able to pick between the two. To address this debate, I will highlight few of the top consideration to narrow down your buying decision.
Important Questions to ask yourself.
Before we start with the guide, here are few questions that you will need to keep in mind as you read through:
1) Are you purchasing this property for Own-Stay or for the purpose of Investment?
2) Do you need a place Immediately or could you afford to Wait At Least 3 Years?
3) Is Capital Appreciation a priority to you?
These questions will pose as a guide for yourself which will give you a better answer at the end of this article.
The Pros and Cons
1. New Vs Old
The best aspect about a new launch development is that everything about the development is in Mint and Pristine condition! Some new launches even offer facilities that are beyond the average standard. Some of the few examples are – In-Built Smart Home System, Rooftop Infinity Pools, Ice Therapy Area, Concierge Service etc.
Unlike its Resale counterpart, where you must worry about the condition of the unit. There could be something that was broken by previous owner and extra cost and time is needed for the repairs. On top of that, older development tends to face issues like leakage, walls cracks, chips in flooring or even broken and rusty facilities which could pose as a hazard to the resident. With these being mentioned, it will bring us to our next point about maintenance fee. Buying a newly launched condo also means that the chances of defects are lower (There will be a 1-year Defect Liability Period given by developer even if there are any defects), and when defects are minimal, lesser maintenance are needed, which naturally leads to lower maintenance fees. On the other hand, a resale condo usually has a much higher maintenance fees, since it is older and more intensive maintenance are needed.
2. New Launch Discounts
Many of you would have heard of, or perhaps saw advertisement about new launches that promote “VVIP Discounts”. These are a common practice amongst developers in Singapore to create awareness and entice potential buyers for their new project. Developers usually gives these “Discounts” during the early stage of their launch, and they can be in the form of price discounts, vouchers or even stamp duties reimbursements. Buyers of new launches during this early stage usually make a huge profit once the development reaches its TOP (We will be discussing in the later part of this article whether if this holds true all the time). On the other hand, these discounts will never be seen in the resale market. Resale property owner will never give a stamp duties reimbursement as this will mean a 4% reduction to their asking price. However, we cannot deny the fact that there are still great bargains for resale condos occasionally. Especially during the recent Covid-19 Pandemic where several fire sales were seen in the resale market. In this case, a resale condo would be a more appealing option.
3. Occupancy
On an average, new launched development would take about 3 years for construction (If you purchase at the initial stage of launch) before it is ready for occupancy. During these 3 years of construction, owners who have already sold their house would have to look for a temporary place to live in.
On the contrary, resale buyers will never face this issue of having to look for an alternative place to live as the unit will be ready for immediate occupation. But of course, this is provided that no major renovation is needed for the resale unit, and that all timelines are being planned properly.
A resale condo is also a better option if you are buying for the purpose of renting out. Since you can rent it out immediately, this would mean that you will have an immediate source of rental income. On top of that, potential tenants can visit the house to get a sense of what the place look like which could help them decide more efficiently.
4. Size Of Unit
Resale Condos are generally bigger than new launch condos. Let us look at the following examples of a 2-Bedrooms unit in Bukit Regency (Resale) vs a 2-Bedrooms unit in Verdale (New Launch). Both developments are in the same vicinity – Bukit Regency was constructed in 1995 and Verdale is targeted to TOP in 2024.
Verdale 2- Bedrooms (732 Sqft)
Bukit Regency 2-Bedrooms (925 Sqft)
As a matter of fact, Verdale 2-Bedrooms unit at 732 Sqft is an above average 2-Bedrooms unit size in today’s New Launch market. There are 2-Bedrooms unit that even goes as small as 600 Sqft currently.
In land-scarce Singapore, prices of land have been on the uptrend cycle. As land is getting more and more expensive, developer have no choice but to reduce the size of each unit in order to make them affordable to purchasers. If you have a large family, or solely enjoy a bigger home, then a resale condo would be the better option here.
5. Livelihood In The Condo
When it comes to new launches, there are certain factors that we will not be able be to see. For example: our future neighbours, the quality of the facilities, how good the management committee will be etc.
I have heard several stories of how buyers of new launched properties were upset when they received their keys and step foot into their newly constructed home for the first time. A great example would be a personal encounter with a client of mine, we shall call him Mr Tan.
Mr Tan purchased a new launched condo back in 2013, the unit he purchased was facing the Pan-Island Expressway (PIE). The developer told him that they will provide double-glazed window for all units facing the PIE, and that the noise level will be reduced significantly. Mr Tan was convinced that his unit would not experience any noise from the PIE and he proceeded with the purchase.
In 2016, when he finally collected his keys and step into his unit for the first time, he was shocked and upset at how noisy his unit was even with the double-glazed window in place. He mentioned that he has not had a good sleep for the first few months and even had the thought of selling his house within the first year, even if he had to pay the 4% Seller Stamp Duty Tax.
From this real-life example, we can see that there are certain factors that cannot be judged or predicted, and this is when resale condos have the upper hand. If you want to purchase a unit in a particular condo, you can travel down physically to see and feel the unit for yourself. You can check the noise level, see if you enjoy the view, or even inspect the condo facilities to see if the management committee have been doing a good job.
6. Unit Choices
In a New Launched Project, you are undoubtedly spoilt for choice. You get to pick a unit that you prefer, be it a good facing or good Feng Shui, you will have plenty to select from. On top of that, this is especially important if your intention is to purchase and rent out in future. A premium facing unit like those with Seaview or Pool view usually fetches better rental yield.
On the other hand, a Resale condo do not offer you a variety of options. You can only choose from what are available in the market (Unless you are willing to wait until your desired unit is available). On top of that, you could be facing competition from other buyers that are eyeing on the same unit.
7. Payment Schemes
Resale condos require you to make a 25% down payment and start the monthly repayment immediately after. On the other hand, New Launch Condos offers a more flexible payment scheme:
1. Progressive Payment Scheme (PPS) 2. Deferred Payment Scheme (DPS) (Available for New Launch that already attained its TOP)
For PPS, the payments will be based on the construction’s progress, let us look at the following table for a better understanding:
Here is how PPS work:
1. Pay the 5% Booking Fee (Via Cash Only) 2. Sign the Sales & Purchase Agreement and pay 15% (Via Cash/CPF) 3. Payment of Stamp Duties within 2 Weeks (Via Cash/CPF) 4. Progressive payment base on stages of construction
For monthly repayment though PPS, buyer will be able to start paying with a minimal amount and gradually increase to the full amount as the construction is near completion. Here is an example of how it works: Assuming S$1,000,000 purchase, with 75% loan and a Loan Tenure of 25 Years at 1.5% Interest Rate: Monthly repayment will start as low as S$137.00 during the Foundation Work, and gradually increase to $687.00 during the Ceiling Work. Finally, it will rise to its full amount of S$2,062.00 after the development attained its CSC status.
If you are taking a bank loan, you do not have to do anything. Your bank would disburse the amounts needed on your behalf and send you a letter thereafter to inform you about the payment disbursed.
Another option would be Deferred Payment Scheme (DPS), this option is generally available for New Launches that have attained its TOP status. Some developer call DPS Scheme as Stay and Pay Later Scheme, as it allows buyer to move-in immediately after a payment of just 20%. After which, you have a period of 24/36 months, depending on the terms of contract – which you do not have to pay anything. Monthly repayment will only resume at the end of this period.
8. Capital Appreciation
Many Newly launched condos have seen capital appreciation of more than 30% after it obtained its TOP status, and this is within a short span of 3 – 4 years. Resale flat on the other hand which capital appreciation are usually known to be slower. I will be explaining this point in-depth in the Part 2 of this guide, which I will break down each crucial pointer that you have to be aware of when deciding between New Launch and Resale Condos in terms of its profitability and future upside potential.
Click here to read Part 2.
