new launch vs resale Archives - Holland Property

New Launch vs Resale Condos In 2024: Which To Buy?

hollandproperty — Fri, 16 Feb 2024 15:36:25 +0000

New Launch vs Resale Condos In 2024: Which To Buy?

The property market has seen some notable changes over the year; but one of the more obvious differences is the price gap between new launch and resale condos. With new launches now at around $2,000 psf, an increasing number of buyers – including HDB upgraders – are starting to feel priced out. But how wide is the gap between new and resale right now, and what are some of the other factors to consider when choosing?

New Launch Condo Prices In 2024

New Launch Condos in CCR

We’ll begin with new launch condos in the CCR:

New launch prices averaged $3,007 psf in January last year, rising to $3,168 psf as of January this year. Notice, however, there’s a sharp drop in the number of new launch transactions; largely due to the number of available launches, but also possibly due to new cooling measures (see below).

New Launch Condos in RCR

Next let’s look at the RCR:

Prices averaged $2,601 psf in January of last year, dipping slightly to $2,568 psf in January this year. The transaction spikes in the middle of last year were mainly due to three major launches all happening in District 15 (Grand Dunman, Tembusu Grand, and The Continuum).

New Launch Condos in OCR

Next, let’s look at the OCR.

The OCR saw a strong pick-up in price over last year, rising from an average of $1,775 psf, to $2,019 psf. This is not entirely unexpected, since the OCR is where the bulk of homeowner transactions (mostly HDB upgraders) see the most demand.

Do You Notice A Common Factor In All Three Regions?

At this point, the average price of a new launch is now over $2,000 psf in all three regions. It’s now an inescapable fact that for family-sized units (typically three-bedders of at least 900 sq. ft.), the typical quantum for a new launch condo is around $1.8 million.

If we consider a 25-year home loan at the maximum loan quantum (75% of the price), monthly loan repayments (at 4% per annum) come to $7,126 per month. This means that, to meet the TDSR, which restricts monthly loan repayments to 55% of your combined income, the borrowers may need to earn close to $14,000 per month (unless they can make a bigger down payment).

Also keep in mind that 900 sq. ft. is smaller than the average 4-room flat, so those with bigger families may face a quantum of $2 million or more. This is all, quite frankly, well past comfortable territory for many median-income Singaporeans.

Resale Condo Prices in 2024

Resale Condo Prices In CCR

We’ll start with the resale prices in the CCR:

Prices in the CCR have been mostly flat over the year – they were at $2,309 psf in January 2023, and are at $2,312 psf now. I actually expect more of this muted performance in the near term, for reasons I’ll cover below.

Resale Condo Prices in RCR

Resale prices in the RCR are trending upward, from $1,747 psf in January last year, to $1,868 psf this year. As a matter of opinion, this could trend further upward if we see issues in the wider economy (e.g., further impact from the war in Europe and in Gaza). This is because, when companies cut costs and shrink expatriate housing allowances, we sometimes see an exodus from the CCR into the more affordable RCR properties; this might prompt investors to buy within the city fringe instead.

That said, it will boil down to whether investors are still interested in rental assets in more prime areas, given the higher ABSD rates today.

Resale Condo Prices in OCR

Now let’s look in the most segment: resale condos in the OCR are the bread-and-butter of the homeowner market in Singapore; especially given that new launches are increasingly out of reach:

It’s relatively happy news for home buyers.

Prices have risen from $1,340 psf in January last year, to $1,410 psf this year; but an increase of just over 5% is at least tolerable to most. The really good news for buyers is that, as of November 2023, we can see the average price has been sliding.

With the exception of the CCR, average resale prices in the RCR and OCR have stayed below the $2,000 psf mark; and it’s still quite possible to find resale units in the $1.4 million to $1.6 million range. This is generally comfortable for HDB upgraders, if not first time buyers, so I would expect the bulk of transactions to be in these resale segments going forward.

What’s Happening In The CCR?

One of the key factors in the CCR is the impact of last year’s cooling measures.

As of April 2023, the ABSD on foreigners was doubled to 60%. This is not a huge issue for the OCR, as few foreigners buy there anyway – but the CCR will likely bear the brunt of this going forward, as this region has the biggest number of foreign buyers.

If there are buyers in the CCR this coming year, I expect it will mainly come to buyers seizing upon the narrowing price gap between the RCR and CCR.

Within the RCR, there is (speculative) hope that the cooling measures will push buyers from the CCR into the relatively cheaper city fringe. In any case, I also expect that the launches of Grand Dunman, Tembusu Grand, and The Continuum so close together will have a knock-on effect on surrounding resale homes; this could lead to District 15 bumping up the regional average.

Harmonisation of Gross Floor Area

Another factor to consider are the changes to the definition of Gross Floor Area (GFA), which would apply to the new launches we’re seeing now.

As of June 2023, the government is standardising the definitions of Gross Floor Area (GFA) across regulatory bodies. This also has an impact on new launches though.

Several of the methods used to maximise prices in the past, such as building extra large air-con ledges, or charging for “empty air” between the floor and ceiling (strata void space) are no longer allowed. Previously, developers were able to charge buyers for the square footage of these features, even though they themselves were not charged for it.

The impact on price is not yet known to us – it could go in two different ways. On the one hand, it may result in more space for the amount you pay. On the other hand, developers may simply raise prices, to make up for the inability to use these methods. As such, I would say it may not affect the prices; but there’s a clear win in that you’re buying actual square footage you can use.

This would be a significant advantage for new launch buyers, compared to less space-efficient resale units. No one really wants to pay several thousand dollars for planter boxes they don’t use, even if the overall price may be lower.

Conclusions On New Launch vs Resale Condos in 2024

For those upgrading from 3-room or 4-room flats, or on a budget, new launches may be an uncomfortable stretch at this point. Executive Condominiums (ECs), or a resale unit in the OCR, are probably more sensible (and you can upgrade further from those in future, if you like)
For buyers with a bigger budget, it may be worth keeping an eye on new launches in the CCR, if developers get nervous about the ABSD and are more modest with prices. Alternatively, you might look to the RCR, and try to take advantage of narrowing prices with the CCR.
For singles and couples (no children) who are buying smaller, low quantum units, it may be worth looking at new launches. This is because the lower overall quantum might still make the units affordable, and the more efficient layouts of newer condos are even more important, when you’re buying a compact unit.

For more personalised assistance or further questions, do reach out to me directly and I’ll be glad to help.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny has a genuine interest in people and firmly believes in personal integrity. While helping homeowners with their property needs, their interest always takes precedence over his personal gains. Hence, Danny has consistently earned his clients’ complete trust and loyalty. Many of them have become his personal friends.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

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The post New Launch vs Resale Condos In 2024: Which To Buy? appeared first on Holland Property.

Investment Property: 6 Reasons Why New Launch Is Better Than Resale

hollandproperty — Tue, 31 Jan 2023 10:24:00 +0000

Investment Property: 6 Reasons Why New Launch Is Better Than Resale

Today, property investment is the aspiration of many Singaporeans.

In an increasingly affluent and progressive nation, we look beyond having just a roof over our heads. Property investment is a popular strategy to plan for our retirement.

The question is, when you are looking for an investment property should you be looking at a new launch or resale condo? Which one has more potential to help you make some gains in the future?

When you start comparing the new launch versus resale condo, the most noticeable differences are the differences in sizes and per square foot prices. New launches are generally smaller and higher $psf.

But does that mean resale condos are better buys?

If new launches are smaller and more expensive in terms of $psf, why are more people buying them?

Reason #1: New Launches Are More Profitable Than Resale

One usual response I get is, “New launches are so much more expensive, how to make money?”

What is most baffling is that though new launches are more expensive than the resale in terms of per square foot prices, they are actually more profitable. Isn’t profitability what you are after when buying an investment property?

Let’s look at some examples of new launch versus resale.

Commonwealth Towers versus The Queens

Commonwealth Towers and Queens are next to the Queenstown MRT but on different side.

They were both T.O.P. in 2017 and 2002 respectively.

Commonwealth Towers was launched in May 2014 at an average price of $1,622psf as compared to Queens at only $1,218psf.

To date, Commonwealth Towers have gained 26.33%, whereas Queens 19.99%.

Alex Residences versus Ascentia Sky

Both are near to the Redhill MRT. Their respective TOP years are Ascentia Sky (2008) and Alex Residences (2017).

Alex Residences was launched in Nov 2013 at an average price of $1,719psf. At that point, Ascentia Sky was transacted at a lower $1,375psf.

Fast forward, Alex Residences has since gained 26.75% while Ascentia Sky 14.74%.

While it seems like resale condos are better buys when the nearby new projects are launched at a higher $psf, empirical research shows that the new launches are more profitable investment properties.

Reason #2: New Launch Buyers Enjoy First Mover Advantage

Based on research by OrangeTee & Tie, about 9 out of 10 who bought new homes from the developers in the last 10 years made profits.

Developers sold 115,610 new homes in the last ten years. About 15% (16,017 units) were resold with an average gross profit of $220,000. These profitable resales were across different market segments.

Take a look at some projects that were TOP in the last 2-3 years where most units were resold at profit.

Project	Segment	T.O.P.	Gains (No.)	Average/High Gains	Losses (No.)	Average/High Loss
Coco Palms	OCR	2018	73	$117,180 / $431,500	0	0
The Glades	OCR	2017	9	$49,138 / $115,500	4	$25,178 / $70,100
Sim Urban Oasis	RCR	2017	26	$125,047 / $264,751	0	0
Commonwealth Towers	RCR	2017	26	$199,123 / $345,300	0	0
City Gate	CCR	2018	8	$143,906 / 213,000	0	0
Duo Residences	CCR	2018	26	$192,679 / $409,900	4	$337,890/ $937,000

Source: Edgeprop

Why did most of the buyers of these new launches make money for their investment property? The reason was they enjoyed the first-mover advantage.

As the saying goes, “early birds catch the worms.”

The best time to buy is during launch. Developers typically offer their lowest prices to entice buyers and to spur sales. This approach helps to create hype.

Over time, as the project sales move, it is not unusual for developers to start increasing their prices at various stages.

There is a TOP effect where buyers are willing to pay a premium to see the finished products and enjoy immediate occupation. So those who buy at launch generally will make a profit.

Price Preservation

Owners who bought first hand will rarely sell at a loss because of price preservation.

What if you buy a unit from the first owner who paid the developer’s launch price?

Let’s suppose the launched price of the unit you bought was $1,400psf, but you paid $1,700psf. Five years later you want to sell at a 10% profit. So you need to sell at $1,870psf. But you would be competing against many first owners who bought at an average of $1,400psf. These owners will limit your upside potential.

If you buy a new condominium, you are on an equal playing field as all others when putting their property on the market. Since every owner wants to make a profit, you will likely make a profit too on your investment property.

If you buy a new condominium, you are on an equal playing field as all others when putting their property on the market. Since every owner wants to make a profit, you will likely make a profit too on your investment property.

Reason #3: New Launches Are More Affordable

You may be asking, how can new launches be more affordable when their prices are so high in $psf?

Do you notice new launches are so much smaller than the older condos?

Those apartments that built in the ’80s and ‘90s come with 3-bedder anything from 1,600sf to over 2,000sf.

In the following decade, 3-bedders are typically between 1,300 to 1,700sf.

Then, up to 2009, we see an era of apartments with huge balconies, disproportional air-con ledges, double-volume space and bay windows.

Today, the 3-bedders have shrunk to a mere 900sf to 1,200sf.

With land prices so astronomically high these days, developers are building the apartments smaller to make the quantum more affordable for buyers.

The Impact of TDSR

There is a reason why apartments are now built much smaller.

At one time, the gap between new launches and resale condos is very close, and at times even converges.

But everything changed on ‘D Day’ 29 June 2013.

After several rounds of cooling measures that could not tame the market, the government introduced the mother-of-all cooling measure: Total Debt Servicing Ratio (TDSR). TDSR limits the maximum loan of the borrower to 60% of one’s gross monthly income.

Monthly debt includes all outstanding debt obligations:

Property-related loans, including the loan being applied for.
Car loans.
Student loans.
Renovation loans.
Credit card loans.
Any other secured or unsecured loans, including revolving loans.

It instantly changed the whole landscape of property investment.

Affordability becomes a major issue.

The only way developers can get around this issue is to make the new condos smaller.

The Key Is Affordability

When you are buying an investment property, it will likely be your second property.

If you have an outstanding loan, you are only eligible for 45% Loan-To-Valuation (LTV) for your second loan. That means if you are looking at a $1m investment property, you would need 55% of capital outlay.

Let’s suppose you already have one property in your spouse’ name, and you want to buy an investment property in your name as your first property (adopting the Sell-One-Buy-Two strategy).

Since it’s your second property, which is an investment property, you want to be prudent and not over-stretching your resources.

Comparing Commonwealth Towers and Queens

Let’s go back to the example of Commonwealth Towers and Queens.

Queens’ smallest unit is a 915sf 2-bedder. In August 2014, a #17 unit was sold for $1.25m ($1,366psf)

The smallest 2-bedroom unit at Commonwealth Towers is 689sf. The transacted price for #17 unit was $1.018m ($1,479psf).

To buy the said Commonwealth Towers at $1.018m, the buyer’s minimum gross income is $5,800 a month. Your 25% downpayment is $254,500.

On the other hand, a buyer needs to earn $7,100 a month to buy the 2-bedder at Queens with a downpayment of $312,500.

A 689sf 2-bedroom unit at Commonwealth Towers was recently rented out at $5,200 and a 915sf 2-bedroom at Queens at $4,000 . That works out to 6.1% versus 3.8%.

Of the two, which is more ‘affordable’ and enjoy better rental yield as an investment property? The obvious answer is Commonwealth Towers though in $psf term it is higher than Queens.

When comparing new launch versus resale condo, new launch while higher in $psf, is more affordable and gives better rental yield

Reason #4: New Launches Have Better Designs and Facilities

New projects usually come with better and more updated amenities such as infinity pools, aqua gym, onsen spa, sky gardens, themed pavilions, private kitchens, game rooms, karaoke rooms, gyms with state-of-the-art equipment, badminton hall, branded appliances and high-end finishing.

The list can go on and on. Every developer is trying to out-do one another.

It is quite common for developers to engage world-renowned architects to differentiate themselves.

Newer condos with better design and facilities will usually attract tenants who are willing to pay a higher rent while sacrificing on the size.

The biggest advantage of new launch over older resale is the feel-good factor because everything is newer and nicer

Reason #5: New Launches are Easier To Rent Out

If you are buying an investment property and deciding between a new launch versus a resale condo, new launch will definitely has an edge when looking for tenants simply because it is new and better, even if it is smaller.

Today, tenants are spoiled with choices.

Potential tenants will almost always go for condos that are newer and nicer. New condos not only are easier to rent out than the older ones but also they enjoy better rental yields.

The older developments lose out to the brand new condos on the facilities. For the interior of the units, owners will need to renovate the apartment, sometimes extensively, to make it more tenantable.

It is not uncommon for tenants to be concerned about the state of the air-conditioners if they are old. They are worried about things breaking down, such as washing machine or refrigerator.

If the apartment is brand new, everything that comes with it is brand new and under warranty. The developer covers even the first year servicing of the air conditioners. So it’s hassle-free both for the landlord and tenant.

Newer condos are not only easier to rent out than the older ones but also they enjoy higher rental yields

Reason #6: New Launches Have Lower Cost of Maintenance

One of the major considerations when choosing between a new launch and resale for your investment property is the cost of renovations for the latter. This cost involves your cash reserves. For an investment property, it is not ideal to eat too much into your cash reserves.

You might burn a big hole in your pocket if you need to overhaul the whole apartment with new air-conditioners, wardrobes, flooring, bathrooms and kitchen cabinets. Furthermore, you may need to buy a new washing machine, dryer, refrigerator and oven. It is not uncommon to end up spending more than $100,000.

New condos come with everything new, including branded appliances. And if there is any defect, they are covered under the one-year defect liability period by the developer. The saving can be quite substantial.

As the apartments aged, especially those that are 15 years old and above, they are prone to structural issues like leaking and choked pipes. You need to fork out higher sinking funds as the costs of maintenance and repair for the common areas and facilities go up.

New condos are spared from such problems with all things new.

Concluding Thoughts

While we are saying new launches are better investments, not all new launches will make money. It is important for you to consult an experienced agent to identify the right choice of new launch.

After all that been said, it also does not mean it’s wrong to buy a resale condo. There are many investors who believe in resale condo for various reasons. Here we are expressing our opinions, supported by research, why we think new launches are better investment property.

If you are planning to buy an investment property but not sure as to what is the best option, do feel free to contact me for a non-obligatory discussion.

Do go to my Facebook page and click like because there is another upcoming related topic.

Need an opinion on your property investment plans? Want to know the value of your property? Or need help to sell or rent out your property?

Get a 1-time free 30 min Property Wealth Planning consultation. Schedule one right now by using the calendar below .

A PWP consultation includes:

An in-depth financial affordability assessment
Highly relevant investment insights
A clear and customised investment road map for your real estate investment journey ahead.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post Investment Property: 6 Reasons Why New Launch Is Better Than Resale appeared first on Holland Property.

new launch vs resale Archives - Holland Property

New Launch vs Resale Condos In 2024: Which To Buy?

New Launch vs Resale Condos In 2024: Which To Buy?

New Launch Condo Prices In 2024

New Launch Condos in CCR

New Launch Condos in RCR

New Launch Condos in OCR

Do You Notice A Common Factor In All Three Regions?

Resale Condo Prices in 2024

Resale Condo Prices In CCR

Resale Condo Prices in RCR

Resale Condo Prices in OCR

What’s Happening In The CCR?

Harmonisation of Gross Floor Area

Conclusions On New Launch vs Resale Condos in 2024

SUBSCRIPTION FORM

Investment Property: 6 Reasons Why New Launch Is Better Than Resale

Investment Property: 6 Reasons Why New Launch Is Better Than Resale

Reason #1: New Launches Are More Profitable Than Resale

Commonwealth Towers versus The Queens

Alex Residences versus Ascentia Sky

Reason #2: New Launch Buyers Enjoy First Mover Advantage

Price Preservation

Reason #3: New Launches Are More Affordable

The Impact of TDSR

The Key Is Affordability

Comparing Commonwealth Towers and Queens

Reason #4: New Launches Have Better Designs and Facilities

Reason #5: New Launches are Easier To Rent Out

Reason #6: New Launches Have Lower Cost of Maintenance

Concluding Thoughts

SUBSCRIPTION FORM