New Launch or Resale Condo which is Better? – 4 Hidden Factors to Consider

The experts usually say new launches are better investments, but not all new launches will make money. Buying a resale unit is less risky for new homeowners or new landlords, while new launches are better suited for seasoned investors. Bear in mind that when you’re buying an investment property to rent out, you have a different set of considerations from the typical homeowner. 

The choice can be daunting for those looking to purchase their first private property. Here are some factors that can help you make a choice between a new launch condo or a resale condo as you set your sights on your next property.

Time Factor: Can You Afford To Wait?

The waiting time between the new launch condo and resale condo is one of the starkest differences.

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 do 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.

  1. Price Factor

For a big-ticket item, price is always a significant 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.

  1. Rising Land Cost

Compared to the resale condos, the land cost for the new launch condo is likely to be higher, and the developer then passes on the higher land cost to homebuyers.

  1. 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?

  1. Condo Tenure

The term tenure refers to the various ways to own a property. New launch leasehold condos have longer tenure. If you consider the condo’s age, 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 bargains.

Sometimes, you may find decent units priced at a discount as part of the developer’s marketing to move units in a slow-selling project.

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  1. Choice Factor: Flexibility In Choice (Resale Condo) vs Ballot (New Launch Condo)

The choice factor is one distinct advantage that resale condo has over the new launch condo.

For new launch condos, you need to consider 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, and you can only choose whatever unit is left over when it is your turn. Thus, you may or may not get your desired unit, depending on your ballot number.

In contrast, you don’t have to worry about your choices if you were to buy a resale condo. You can take your pick from any unit 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 what are the odds that two (or more) willing buyers happen to put their eyes on the same resale condo?

  1. Repayment Factor: Upfront (Resale Condo) vs Progressive Payment Scheme (New Launch Condo)

Buying a condo requires a substantial 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 a downpayment in cash or CPF. On top of that, you will also need to pay for the stamp duty and legal fees. This can be a heavy 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. With the Progressive Payment Scheme 

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 20% downpayment (within 5 to 6 weeks)
  • Pay the remaining 75% in phases as the construction is completed (across 3 to 5 years, based on project construction)

There’s all for the factor side, let’s talk about the Benefits of choosing Resale Condo and New Launch.

For the pros in choosing Resale Condo:

  1. Asking Price is Always Negotiable
  2. Rental income is more predictable. 
  3. You can touch and feel and view the actual house; you can experience the day & night views of the house.  
  4. And experience such as traffic noise, Brightness or heat at a different time of the day. Instead of buying a new launch based on floor plans 
  5. You can start renting out the place immediately.

On the other side, the advantages of choosing New Launch Condo are:

  1. Developers giving discounts during Preview or may have other promotions.
  2. No Maintenance Fees until the condo is completed. 
  3. Easier to Rent the Property out for investments
  4. Location Growth. Capital Appreciation
  5. Developers may raise the price over time as they give more incentives to buyers who take action earlier.

Now, you’re probably asking yourself, which is the better choice? Buying a brand new or a resale condo? – Which one of the two is a better investment? Which option makes the most monetary sense? These questions can be answered depending on the purpose of your purchase. First you have to ask yourself, why are you buying a condo? Are you looking for en bloc potential to turn a profit? Are you trying to find a lovely home for yourself and your family? Or are you looking to find the right place to make passive income through rental yield? Each of these questions leads to different answers. Once you’ve got your intention for purchase, you can start to explore your options and make decisions based on the four factors that we discussed above! However, it is a more in-depth analysis of different needs that we may not be able to explain through video. If you do need advice on such matters, feel free to contact us right now to get a free consultation call.

 

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