SHOULD YOU BUY A RESALE PROPERTY OR A NEW LAUNCH?
For many who are considering buying their first private property, the first question is always Resale or New launch? Would you go for a brand new unit with the latest smart home features or would you pick a well maintained resale unit? With the market flooded with new launches, it is hard not to be tempted to invest in one especially when your friends, relatives or colleagues have already jumped on the bandwagon! The recently launched condo, The M by Wing Tai, actually saw 70% of their units sold on launch day, amidst the coronavirus outbreak! The lustre of a new launch is indeed unstoppable!!
Huge turnout at a New Launch "The M" by WingTai amidst the coronavirus situation
Source: The Business Times
However, before one takes the plunge, it is always good to do your own research and carefully evaluate the pros and cons of each. A new launch may seem very attractive at first glance but a resale property may be a better choice after serious consideration.
One of the most important consideration should be: Are you buying for your own stay or as an investment property?
If you are buying for own stay, you might not want to wait 3-5 years for a new launch. If you are looking for an investment property, perhaps a new launch might be more appealing as it is brand new and might attract more tenants. Let's look at 6 key points below that may influence your decision making between a new launch or resale
property.
1). PRICE OF NEW LAUNCH VERSUS RESALE
As land bids increase in price over time, the cost of building new projects by developers keeps rising over time. As such, the price of a new launch has been increasing steadily over the years.
According to URA statistics, the average price for a mass market project has risen from approximately $1200 psf in 2015 to approximately $1525 psf in 2019. That is a pretty significant increase of $325 psf over 4 years.
On the other hand, the price of a resale unit increased from approximately 900 psf in 2015 to $1043 psf in 2019. That is an increase of $143 psf in 4 years. Therefore, one can safely assume that for 2 units that is of the same size, the price of a new launch unit will definitely cost more than that of a resale unit at the same location.
That is why it is important to ascertain if the property is for your own stay or for investment. If one is buying for own stay, the size of the unit and its rooms may matter. With the budget you have, you may have to sacrifice on the size of the unit if you choose a new launch project.
For those buying for own stay, that might be difficult especially if you have a big family or simply enjoy more living space for your family.
Another important factor to look out for is for resale units, there is a chance of scoring an under valued property if the existing owner is urgently trying to sell the property. This is highly unlikely in the case of a new launch (although developers might give some discounts and incentives) , it is generally not possible to buy a property that is way undervalued.
For those looking to score a really great deal, significantly below market price, a resale property is probably the way to go.
2). RENTAL INCOME
For an investment property, rental income is one of the most important consideration. Rental income is generally immediate and predictable for resale units. Prospective owners know what to expect when they buy resale properties and they can rent out their unit immediately to help with the mortgage payments. Also, you may have an immediate tenant already if the unit that you purchased is tenanted.
For new launches, rental income depends on demand and supply. Do take note that as all the units will be in the market at almost the same time, there are many units for the prospective tenants to choose from. Hence the rental price might be affected due to the large number of units available initially.
My client, Mr Tan, initially thought that he could rent out his one bedder at Commonwealth Towers for a conservative price of $2500 after he has received keys to the unit. However, due to the large number of one bedders for rent at the same time, he had no choice but to accept an offer of $2200 instead.
Another point to note is that most new launch will only be ready 3 to 5 years after you have purchased it, therefore, immediate rental income is not likely for new launch.
3). CHOICE AND CONDITION OF UNIT
This is one of the biggest advantage of buying a new launch. There are many layouts, facings and sizes to choose from. Sometimes, even a one bedder has so many different layouts and configurations that the buyer is totally spoilt for choice. In fact, I personally have encountered my clients not able to decide which one bedder should they pick! Of course, being a new launch, the whole project is brand new! The unit and all the facilities are in absolutely new condition.
For resale units, generally there are only a few for sale and buyers don't always get their choice of facings or layouts. For those of you that are very particular on the house number or must have your favourite north /south facing, perhaps new launch will be a better choice or you may have to wait for a long time before a suitable unit comes along in a resale development.
A resale development is also likely to be older and wear and tear is to be expected for a condominium that is 10 years old or more. The facilities are also older and some may look dated.
4). IS WHAT YOU SEE ULTIMATELY WHAT YOU GET?
The fancy showflat models by developers which are immaculately designed by interior design firms are ways developers use to attract and entice buyers to buy their project. Buyers need to know that unless they are buying the showflat unit itself, what they will eventually get is a far cry from what they actually see at the showflat.
On the other hand, the resale unit is the actual, completed product and indeed, what you see will be what you get. There are usually little surprises as you can gauge issues such as traffic noise, pest problems and even noisy neighbours.
These sort of issues are hard to predict or imagine when dealing with a new launch that doesn’t physically exist yet. It is very hard to have a good gauge of the distance between the blocks, the noise from the traffic in your actual unit and also who your potential neighbours might be!
If you need this peace of mind and don't like the uncertainty of a new launch, then resale properties are probably for you.
5). MAINTENANCE COST
For those considering a resale condo, it is important to know that the older a condo gets, the overall maintenance costs tend to go up as well. This applies to your condo unit, as well as the communal areas within the whole condominium.
Older resale condos are more likely to have issues such as yellowing walls, damp ceilings from air-conditioner leaks, choked plumbing or failing water heaters. New launch condos being new, have fewer such problems; Also, most developers have a one-year defects-free period. That means they are obliged to rectify the defects for free within the one year period.
Older condos may see rising maintenance bills as the facilities are clearly older and in poorer condition. Facilities such as sauna rooms and pools can cost more to maintain as the systems age.Therefore, in considering a resale unit, the age and the condition of the actual unit and the general maintenance of the whole development does matter.
Yes, not all resale condominiums are the same!
6). PAYMENT MODE
New Launches are usually on progressive payment mode. For buyers not taking a mortgage loan, you do not need to come up with a huge amount of cash suddenly. For those who are taking a mortgage loan, the initial instalments are much lower.
If you are buying a resale unit, do take note that full bank instalment kicks in immediately once the deal is concluded, usually after 3 months.
CONCLUSION
In summary, buying a property is a major investment for most individuals. Regardless of whether you are buying a resale or new launch, for own stay or for investment , proper planning and accurate financial calculations is imperative to ensure a smooth transaction. As a savvy investor, do consider the different options carefully and decide on one base on your individual needs and financial means.
If you would like to find out more, please feel free to contact me for a non obligatory 90 min free consultation at 96658596
Having a keen interest and passion in real estate led Caroline to join the real estate industry. An investor herself since 2006, Caroline is constantly learning and upgrading herself through courses and seminars so that she is able to provide meaningful insights to her clients and to help them successfully manage and restructure their portfolios in the ever- changing market conditions.
Caroline strives to be honest, transparent and professional in all her real estate dealings with her clients. She understands that clients need to work with someone they trust, as they will be entrusting their valuable assets to that person. She is known to be trustworthy and reliable and will ensure that her clients’ interests are protected always.
With a strong commitment to client satisfaction and with the support of her teammates from Navis Living Group (Orange Tee and Tie) , she is confident that she will be able to share her experiences and knowledge to assist her clients in making the best decisions for their real estate needs so that they can achieve their desired real estate goals.