We all love the smell of new things. The smell of that new leather wallet, the smell of a new car or the smell of that new sneaker. When we buy something preowned, that new smell is a little lacking no matter how well kept the item is. But sometimes, we just do not have the luxury of waiting for the new order to arrive. So we have to explore a preowned option. And oftentimes, buying preowned also means paying lesser than you would for that brand new item.
New Launch fans will always gravitate towards that brand new home where you’re the first to own that unit. The first to enjoy the views that your unit has and the facilities that your development offers. For the Resale hunters who are on the prowl for a good deal in the resale market, waiting for a New Launch to be constructed just isn’t your thing. BUT! If you’re on the fence deciding between a New launch or a Resale condo, then perhaps this article will be able to help you with your decision-making process.
No New Releases?
Just because you have the means to buy a brand new home, does not mean that you will be able to. Perhaps this may not be as relatable to investors who are looking to purchase a New Launch project and sell it off after clearing their Seller Stamp Duty (SSD) period, or to rent it out after receiving the Temporary Occupation Permit (TOP). This pool of buyers are likely to be open to several locations when assessing which New Launch project would suit their objectives the best. But if you do intend to utilise the brand new home for yourself or your family, then you may be faced with location restrictions.
Take Jurong for example, there were no New Launches in the Jurong area for the last 10 years. There are several reasons why you may not be able to compromise on the locale of your property. It can be for proximity to a certain primary school, living near your parents or even just purely enjoying the neighbourhood offerings. However, if you had stayed loyal to Jurong and New Launch projects, that would mean you may not have made any property transitions in the last 10 years. There could have been several opportunities that went by during the last decade, which you may have missed out on. So holding on to wait for a New Launch may not be a viable option if you have locational requirements. Your next option would be to go for a Resale unit which you can immediately buy and stay in or look elsewhere for New Launch projects. Good news is that for Jurong fans, you have 3 new projects that have been launched recently – J’den, The LakeGarden Residences, and Sora.
Immediate Rental Income
The next consideration between a New Launch project and a Resale unit is the immediate occupation or utilisation of the property. One method of immediate utilisation is renting out the property. The benefit of a resale property is that you can immediately start generating rental income upon completion of the purchase. However, for a New Launch project, there is a build time of around 3 years before you can physically touch your property. Of course, New Launch projects have the benefit of Progressive Payment Schemes which lowers the monthly commitment as the mortgage loan is disbursed in trenches and only reaches the full mortgage commitment once the property has achieved its Certificate of Statutory Completion (CSC).
This could be a make or break for an investment portfolio, especially if the intention was to position the property for a rental strategy. If you had purchased a Resale unit instead of a New Launch project in 2021, you would have managed to catch the rental market while it was on an uptick. Fast forward to the current day, the rental volume and retreating prices would not be an assuring sign if you are only receiving your key today for the New Launch unit you purchased back in 2021. On the flip side, in this current environment, a New Launch project today may make more sense as you ride out the lull of the rental market during the construction period.
Having the flexibility to put your property up for rental immediately could also be pivotal in keeping your property. Financial prudency is something that we highly advocate especially in a downturn job market. In a worst case scenario if you were to lose your job and was unable to sustain the mortgage loan, an immediate rental could help cover the monthly commitment. Whereas for New Launch projects you would have to find ways to borrow additional equity in order to sustain the monthly commitment or risk forfeiting the unit while it is under construction because you cannot put it up for rental.
Renovation for Your Dream Home
One point that is often overlooked when comparing between a New Launch project and a resale unit is the opportunity to renovate. New Launch projects these days are getting more and more packed with goodies that developers offer in order to add value to consumers and entice them into a New Launch project. However, this would also mean that you would unlikely be redoing the entire renovation of your new home. Light renovation is definitely still expected, but it would be unlikely that you would hack down the new kitchen cabinets or the new flooring in your new home. It is more likely that you would plan your renovations around the existing theme of the new home with the new home furnishings. Of course, some may welcome the fact that minimal renovations have to be done, which is significant money and time saved.
But if you have the vision to design a dream home based on your preferences, a resale unit would offer you the opportunity to redo the entire renovation of your home from scratch, especially if you purchase a well-used resale unit. Although renovation costs are not cheap, the opportunity to renovate and craft your dream home if you intend to stay in the unit for a longer period of time, could be an initial determining factor on choosing between a New Launch project and a Resale unit. One thing that resale units offer in this sense is also space. Often we would notice that older resale units are much larger and that would allow you to create amazing spaces with the extra floor area.
It is likely that for the same budget, your New Launch unit will be smaller than your Resale option purely because of the existing age of the Resale unit, in the same locale. New Launch projects generally have a higher land and construction cost due to inflation over time. And in order to keep the quantum competitive for the consumers, developers have to find ways to efficiently maximise the use of the space. That is why we see newer 3-bedroom units with sizes from 900 sqft to 1100 sqft, while older Resale units have 3-bedroom units with sizes from 1100 to 1300 sqft. So if you are looking to craft out your dream home with a space that is uniquely yours, Resale units could offer you that opportunity.
Valuation
One key difference between New Launch projects and Resale units is the price valuation of the property. Typically, the banks would offer you 75% Loan-To-Value (LTV) of the property. But some Resale units may require you to pay Cash-Over-Valuation (COV) if the banks determine that the value of the property you are purchasing to be lower than the actual price you are paying. The difference would then have to be covered by cash. This means if you are intending to pay $1.6M to the seller for a particular property and the banks only value it at $1.5M, you would need to pay the difference of $100,000 in cash. This is on top of your 5% cash requirement and 20% CPF/cash component.
However, this is never the case with a New Launch project. This is because the developers are seen as selling the units at cost. So even if a New Launch project may be charging a premium for their units compared to the surrounding area, the banks will most often than not, match the valuation of the New Launch property. Similarly, if the developer chooses to run big discounts on some units to boost sales, the banks would match the sale price accordingly and not deem it as an under-valuation. This is one key benefit to New Launch projects as the financial institutions deem the developers to be selling at cost.
Price Flexibility
More often than not, New Launch projects offer a non-negotiable price. There is little flexibility in negotiating especially for highly popular projects. But despite that, we still see units in popular projects getting snapped up. Of course, this is accredited to the competitive prices and future potential that the developers have advertised. Whereas in the resale market, sometimes there is more room for negotiation. Especially if you have been keeping an eye on units that have been in the market for sometime or when the sellers have some sort of urgent requirement to offload in the shortest possible time.
The only time where you will likely see developers offer discounts or are more negotiable to their prices is when they are approaching their TOP stage with some balance units left and they are motivated to clear them off. This scenario would then give rise to the situations where your property agent drops you a text mentioning “Star Buy!!” or “Fire sale!!!!” for a particular New Launch project. And like every Singaporean hunting for a good buy, this is when you head down and take action on that New Launch project approaching TOP.
Final Thoughts
Between you and the next person, there is no identical route that can be adopted because every individual and every family has different requirements and objectives. However, there is a right move that will suit your requirements and objectives. Through this article, we have covered a few points of New Launch vs Resale Condo that you could use for consideration. We also have an earlier article where we covered other points for consideration on this topic. If you still need a deeper discussion and analysis on your right move, feel free to connect with us here. Our PLB Consultants, with their wealth of knowledge and experience, stand ready to offer you a personalised consultation session.
AND! Get ready for the ultimate new condo showcase: PLB x Seedly New Launch Convention 2024! View and compare more than 80+ New Launch condominiums in Singapore through this one-stop expo for investors and homebuyers. If you’re still on the fence and considering a new launch property, this is the best place to be! Join us this July 7th at Suntec Convention Centre, Hall 404 and gain access to PLB’s latest investment strategies and exclusive frameworks for choosing the right condo. Tickets are available here: https://www.propertylimbrothers.com/plb-new-launch-convention-2024/
Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.
PropertyLimBrothers will endeavour to update the website as needed. However, information may change without notice and we do not guarantee the accuracy of information on the website, including information provided by third parties, at any particular time. Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner or your bank to take into account your particular financial situation and individual needs. PropertyLimBrothers does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this website. Except insofar as any liability under statute cannot be excluded, PropertyLimBrothers, its employees do not accept any liability for any error or omission on this web site or for any resulting loss or damage suffered by the recipient or any other person.
