Buying a condo that you can call your own is an aspiration that many Singaporeans have. It is the “defining” moment in your life that many have been waiting for to upgrade from your existing HDB to a condo. But before you can savour this proud moment, there is a major consideration to make first. Should you choose a resale condo or a new launch condo to fulfil your aspirations?
For those looking to purchase your first private property, the choice can be daunting. But fret not, here are 5 (+ 1 bonus!) factors that can help you make the choice between a new launch condo or a resale condo as you set your sights on your next property.
5 Factors To Consider When Choosing Between New Launch And Resale Condo
1. Time Factor: Can You Afford To Wait?
The waiting time between new launch condo and resale condo is one of the most stark differences between the two.
For new launch condo, the typical waiting time is 3 to 5 years, depending on the project. With the Covid-19 situation and its impact on the construction sector, who knows if you need to wait up to 6 years due to construction delays (just like the HDB BTOs).
On the other hand, resale condos are ready to be sold off the shelf. After all, resale condos were built years ago and thus does not require homebuyers to wait that long. The only waiting time is probably for the existing owner to find a new home before they can move out from the resale condo unit.
If time is something you cannot afford, then a new launch condo might not sit so well as a choice for your next home.
2. Price Factor: Lower PSF, But Lesser Tenure (Resale Condo) vs Higher PSF, But Newer (New Launch Condo)
For a big ticket item, price is always a major factor to consider. This is especially when the new launch condo can go as high as 40% more than the surrounding resale condos.
There are a couple of reasons for the price premium for new launch condo.
a. Rising Land Cost
Compared to the resale condos, the land cost for the new launch condo is likely to be higher. The developer then passes on the higher land cost to homebuyers.
b. Market Condition
Don't forget to pay close attention to how property prices are trending. If the property market is booming, why would the developer give up the opportunity to price their new launch condo higher than resale condo?
c. Condo Tenure
Thirdly, the tenure. New launch leasehold condos have longer tenure. If you take into account the age of the condo (i.e. on a PSF per tenure year basis), new launch condos are comparable to resale condos, if not better.
That said, 40% price premium is not the norm. There are also opportunities for you to grab discounts in new launch condos.
For instance, developers may offer price discounts for the less desirable units such as those on the lower level, with blocked views, or unpopular layouts. If you are lucky enough to get a good ballot number, you may grab some of these bargains.
Sometimes, you may also find decent units priced at a discount as part of the developer’s marketing to move units in a slow selling project.
3. Investment Factor: Rental Yield (Resale Condo) vs Capital Appreciation (New Launch Condo)
For those who are looking to buy your second (or third!) property, the investment factor will be a crucial factor to consider when deciding between new launch condo or resale condo.
As mentioned above, new launch condos are usually priced at the same (or even higher!) psf as the surrounding resale condos. But there is a unique characteristic about new launch condo that makes it an attractive investment choice: One-time capital appreciation upon TOP. Even though the new launch condo might be more expensive than surrounding resale condo, most new launch condos will still enjoy this one-time capital appreciation upon TOP.
Unlike new launch condo, capital appreciation is uncommon for resale condos. Not to say that there isn’t, but it is not the norm. Rental yield is where resale condos have the upper hand on new launch condo. Not only is the rental yield much more predictable than new launch condos by comparing against past rental data from surrounding resale condos, you can also start renting from the get-go, i.e. start renting out your resale condo after you buy it.
4. Choice Factor: Flexibility In Choice (Resale Condo) vs Ballot (New Launch Condo)
One distinct advantage that resale condo has over new launch condo is the choice factor.
For new launch condos, you need to consider that there is an element of luck in getting your desired unit, especially if it is the more popular unit in the new launch condo. That’s because a balloting system is used for new launch condos. You can only choose whatever unit is left over when it is your turn. Thus, depending on your ballot number, you may or may not get your desired unit.
In contrast, you don’t have to worry about the choices you have if you were to buy resale condo. You can simply take your pick from any unit that is being put on sale in the market. The only concern you will have is that you might have another buyer who might go into a price war with you. But statistically, what are the odds that two (or more) willing buyers happen to put their eyes on the same resale condo?
5. Repayment Factor: Upfront (Resale Condo) vs Progressive Payment Scheme/Deferred Payment Scheme (New Launch Condo)
Buying a condo requires a huge financial commitment and this is even more so for resale condo.
When buying resale condo, the payment for the condo is upfront. Since you can borrow up to 75% from banks, you will need to pay 25% as downpayment in cash or CPF. On top of that, you will also need to pay for the option and booking fee and stamp duty. This can be a heavy upfront investment for any homebuyer since one-quarter of the home’s value needs to be paid in cash/CPF.
For new launch condos, the payment option is much more flexible. You can consider either the Progressive Payment Scheme (PPS) or Deferred Payment Scheme (DPS).
a. PPS
For the uninitiated, here’s a summary of the repayment scheme for PPS. Note that PPS is only applicable for new launch condos that are still under construction.
- Pay 5% as the Option-To-Purchase (OTP) fee (upfront payment)
- Sign Sale & Purchase Agreement + pay remaining 15% downpayment (within 5 to 6 weeks)
- Pay the remaining 80% in phases as the construction is completed (across 3 to 5 years, based on project construction)
b. DPS
For DPS, an upfront payment of 20% will need to be made. The payment for the remaining 80% is deferred for 2 to 3 years. Once the deferred period is over, you will need to make monthly mortgage repayments.
Note that DPS is available for completed new launch condos that have received the Certificate of Statutory Completion (CSC) and TOP.
Bonus Factor: Choosing The Right Home Loan Package Is Key
Whether you choose to go with a new launch condo or a pre-loved resale condo, there are pros and cons for each choice. The five factors that we have listed above are factors for you to consider when making the choice between the two so that you make the most suitable choice for your financial situation.
But one thing is for sure is that, regardless of your choice, choosing the right home loan package is still the key. For new launch condo, the capital appreciation will only come in after the condo is completed. And since it will be a few years before get that capital appreciation, choosing the right home loan package becomes important. You want to minimize unnecessary interest spending so that you maximize your “profit” from capital appreciation.
For resale condo, your mortgage repayment starts instantaneously. Any excess interest that you don’t trim from your home loan will eat into your rental income. For example, if the rental yield is 3% and you can keep interest rate as low as 1.08%, then you have a healthy margin of ~2% rental yield as income. So, the more you can reduce on interest payments, the more rental income you get to keep.
At Mortgage Master, we know the latest home loan packages in the market and sometimes can even offer exclusive interest rate packages that you cannot get directly from the bank. If you're looking to purchase a new property, or refinance your existing home loan, fill up our enquiry form and our mortgage consultants will follow up with a call.
