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Investors Dilemma – Buy New Launch Condominiums Or Resale Property
With multiple rounds of policies meant to curb property prices growing like bamboo, the market is still going strong.
Add that to inflation consistently hitting levels that overwhelm interest on savings, it is no wonder even the average resident in Singapore is looking at making his money work harder by putting it into properties.
The performance of real estate since 2009 can after all be likened to an express elevator that goes straight up to the 88th floor.
Here are some of the main advantages of both.
New Launch Condominiums
New homes have become very popular with first home buyers as they come with modern fixtures and easier on the eye.
1) Progressive payments
Payments for new condo launches are made progressively throughout the construction of the apartments.
This allows a low entry level for new investors who have smaller upfront funds.
This also means that if you are to take a maximum 80% loan to value on your purchase, you are going to start off your mortgage payments at a more manageable installment. Making such purchases more affordable in terms of cash flow.
For those with a shorter exit strategy, you can also conduct a sub-sale before TOP. Take note of the SSD if you are considering sub-sales.
2) Guarantee from defects
When you buy a new car, it is a given that the dealer will offer you a guarantee period whereby they will repair defects in the car within the guarantee period.
The same applies to new condominiums. Even a $10 thumb drive has a warranty.
All the more a million dollar property should have one as well.
This warranty period is generally 1 year commencing from TOP.
This gives home buyers more peace of mind regarding common workmanship defects newly constructed are associated with.
3) Property in mint condition
You are going to be the very first owner of the apartment.
Everything from fittings to stoves are going to be in the best condition.
Knowing there are no previous occupants is also serves as a psychological peace of mind for some people.
This can be a very big deciding factor to a lot of people.
Developers are so eager to sell you their apartments that they can find almost any reason to give you more discounts.
Early bird discount, postal code discount, Valentines Day discount, National day discount, VVVIP discounts are just some of the freebies you can look forward to.
With more and more new developments in the pipeline, pricing competition is just going to get more competitive.
5) Choice of units
There is a reason why queues form up before a new launch starts.
The people in the front of the queue will be able to choose from many units that are open for sale. The most desirable are often corner units and those on the higher floors.
Those who are late to the launch are usually left with units with lesser demand as the ones that are most attractive are already taken up by the early birds.
So if you have set your mind on buying a particular development, being an early bird is advisable.
When you visit a new launch show flat, you will be awed at how posh the interior designs are.
But you will be a little too naive to think that the fittings, furniture, electronics, etc all come with your purchase.
The good thing is that most of the main items are included.
Just ask the sales staff about it and they would clarify what items are included and what are not.
You might even have the luxury to select the type of flooring and tiles to use among others.
You would unlikely have to spend a huge sum on renovations. If you do, maybe you have bought the wrong property.
Completed Resale Properties
There are some advantages of completed homes that new ones will never be able to match.
1) Paying for it with cash flow
You will be able to rent it out immediately and collect rental to pay for the mortgage.
If you are lucky, you will also have an existing tenant paying rental at market price for the next 18 months.
Not having to spend money on agent fees to find a tenant will already save you thousands of dollars.
2) More affordable in terms of psf
Looking at the current market, it would seem that completed properties are transacting at a lower psf price compared to new launch condominiums under construction.
One could very well buy a bigger house at the same price as an apartment that is yet to be built.
3) Get a real feel of what you are buying
When buying a penthouse in a new launch you can only imagine how the view would be like.
But for a completed property, you can take a real look at the view and save a mental picture of it.
You also do not have to second guess on where the morning and afternoon sun will be.
There are many other aspects that will be more advantageous to be able to inspect physically.
And while new developments can sometimes be located on very attractive locations, locations are limited to the land parcels available for developers to build on.
Whereas for completed property, you can choose any location you like as long as your budget allows you.
4) No risk of construction delays
Completed properties are just that. They are completed and ready for you to play the role of landlord.
Whereas there always a risk of new launches not meeting their deadlines no matter how small the risk is.
This can be caused by financial problems faced by the developer, licenses and permits not approved by the relevant authorities, shortage in the supply of building materials, etc.
In bad scenarios, construction may be delayed by 6 months.
In worst scenarios, developers can go bust. Don’t think that can happen in Singapore?
Last but not least
Property investors can be generally classified into 2 broad categories.
Those investing with a focus on rental yield and those investing with a focus on capital gains.
Seasoned investors tend to prefer completed properties as it can immediately generate cash flow in terms of rental collections.
But when your focus is on capital gains, new launches tend to have a great appreciation in value by the time it TOP.