New Launch vs Resale Condo – Which is the right one for me?
It’s a commonly asked question whether it is better to buy a new launch or a resale condo. Especially with new launch prices escalating to a new high in the last 2 years, many buyers were caught in between and not sure on their choices. Well, one man’s meat could be another man’s poison. You have to assess based on your own objective and preference.
New Launch vs Resale Condo, it is a choice
Some people choose new launch purely because they prefer a brand-new house that nobody has lived in before. Some buy new launch because they are too busy or simply do not want the hassle of renovating old houses. New launches in Singapore come with full renovations, where you only need to buy your own furniture, install lighting and curtains to move in.
On the other hand, some people prefer resale condo, which have larger area and full internal usable space without balcony (built before 2000). Condo space in Singapore is trending smaller in the past decade. Many three-bedrooms were more than 1300sqf 20 years ago, while today average around 900-1000sqf only. Therefore, it is quite difficult for people who are used to live in large houses to squeeze into a house smaller by 30% in size.
Above are all individual preference, you know best what you want, so I leave that to you.
POV from Investment Perspective
Today, I am going to discuss mainly from investment point of view. Generally speaking, if you want faster capital appreciation within 3-4 years, you should consider the new launch properties. However, if you are looking for immediate rental yield with a long term investment approach, you can consider resale condo.
The data shows that the new launch price appreciated faster than resale property especially within first 2 years upon TOP. See below few examples:
There are many investors, who have achieved close to 100% ROE (return on equity) within 3-4 years through new launch properties. Bear in mind, you do not need 100% of your money to own a property. With 75% leveraging on bank loan, the money that you invested ($250K down payment for $1M property) would be doubled when the value of your property appreciates by 25%. Look at Coco Palm investors, it’s pretty decent to earn a quarter million profit over that 4-year time horizon.
I have summarised key Pros and Cons for New Launch vs Resale Condo as below:
|New Launch (Under Construction)||Resale Condo|
|Brand New & Longer lease than resale condo (except for Freehold)||Shorter remaining lease|
|One-year Defects Liability Period.
Upon TOP, any defects can ask developer to rectify for you. Save on renovation Cost.
Better and Newer facilities and building materials.
|50k-100k renovation cost expected for resale units.
The facilities and building maintenance could add extra cost to sinking fund.
|Can enjoy developer price, early bird buyer can get extra discount and priority selection of the best units in the developments||Can only choose from the limited units selling on the market. In a seller market, buyer could face fierce competition from multiple offers to the same unit|
|Faster capital appreciation upon TOP||Slower capital appreciation
Price depreciation may accelerate when remaining lease less than 70 years, unless with clear signs of en-bloc potential
|Smaller in size, higher in $psf||Bigger in sizes, lower in $psf
However, total quantum may be similar or even higher than new launch if the house gets too big
|Easier on cash flow by progressive payment scheme||Full settlement within 3 month|
|Have to wait 2-4 years as it is under construction||Able to move in within months. And if you are an investor, you will get your instant rental yield really soon.|
|Can only rely on the showflat unit and/or floor plans to make a decision, try to choose developer with good reputation||Get to see the actual unit that you are buying|
Singapore property market is dynamic and ever changing, so you need to constantly monitor the trend and spot value buys in both markets. In general, new launch and resale market should have a price difference between 15-30%. If you observe a narrowing or widening gap in any district, it could potentially mean there’s a value buy opportunity there.
If you want to invest in CBD area, the new launch (red line) and resale prices (green line) are quite close, meaning it’s pretty safe to invest into the new launch project in this area. Project like Marina One Residence selling at $2200psf is a good option to consider.
In District 5, we observed a narrowing gap in Feb 2017, which was the period when The Clement Canopy launched.
The projects turned out to be a good buy as price appreciated close to 20% towards TOP time.
In District 7, the gap got widened since early 2019 with the launch of South Beach Residence and Midtown Bay. Prices shot up beyond $3000psf for some units. I would consider those as high risk options as compared with The M, launched Feb 2020 with starting price from $2,100psf.
District 9,10, 11 and 15 shows huge gap between new launch and resale market since en-bloc heated up in year 2017. Buyers should focus on resale properties to get value buys and wait for the price to catch up with new launch projects in near term. This is not to say that you should totally shut your door to new launch projects purely based on graphs alone. You need to understand the reason behind it. For instance, District 15 covers vast area from Tanjong Rhu all the way up to Upper East Coast area. Property price difference across the whole district can be $1,000psf apart. Meyer Road and Amber Road are commanding the highest price due to more prestigious neighbourhoods. They are highly sought after by the rich who desire to stay near the sea. The fact is that most of the recent new launches in District 15 are all round these areas and many are sea fronting developments, hence we do expect a higher premium for these projects.
In conclusion, there are value buys in different segment of the market. You need to dive deep into the specific region to assess which particular development stands out at the time of buying, as the value do change with the price movement in the region. Though data don’t lie, it may not give you a full picture as well. Low price doesn’t always mean good value, most of the time you get what you pay for. Do your research and learn as much as you can before you decide on a property, or tap on our research and check out our top 5 best rated investment properties.
If you would like to have a 1-1 consultation, feel free to contact us.