Which one is the better buy? Resale condo or new launches?
I have seen an ads by certain investment ‘gurus’ that apparently are telling everyone that the opportunity is in the resale market.
They are quite aggressive you just can’t miss them as long as you browse Facebook / Instagram / Youtube.
I have also seen countless fellow realtors who tell us why new launches is the ultimate profit making choice and offer guide on how to pick the right new project with their 3-Key, 5-Essence, 7-Star, 9-Yang formula.
I apologise for slacking and not coming up with my own recipe.
This has been, literally, the millions dollar question that everybody has been asking today. More than ever. Why?
We are reading news on how buyers are snapping up new launches like there’s no tomorrow.
You could be one of the buyers who miss out on One North Eden, having previously missed out on Irwell Hill Residences and Midtown Modern. Now you wonder if there is another better product out there to snatch, if you are lucky enough this time with your ballot number.
But… you could be one of those who stood by the side. Scratching your head in disbelief. Price tag of $2,250 psf is similar to the price Kopar (Newton, District 9) was selling as well as the price that One Pearl Bank (Outram Park, District 3) is selling now. Both are projects with MRT and City at its doorstep. And you are not even convinced by these two.
If we compare this to resale price, the gap is even more striking. Heritage View condo in the same locality as One North Eden are recording average price of $1,2xx psf. That’s about $1000 gap! Surely it’s a no brainer?
As with how I approach everything, I am a believer of context.
In this question of resale or new launches, the context is this- which resale vs which new launch?
And actually, isn’t it true that what we are really asking here is this;
Which project, be it resale or new launch, is worth buying NOW with the budget and goal I have?
If your primary goal is for own stay then please note that your family need and quality of living comes first. And that matters more sometimes.
How about buying for investment?
Why don’t we do a case study?
Let’s look at two projects next to each other a stone throw away from Tiong Bahru MRT.
Highline Residences launched at +- $500 psf higher than Central Green. Five years later, while Central Green price is almost reaching $1,500 psf, Highline Residences price have gone above $2000 psf, maintaining at least $500 psf difference (Note: the transacted $2,2xx psf was for smaller units in Highline Residences).
Central Green or Highline better?
Arguably if you ask the question 4-5 years ago with intention to sell in 3-5 years time, Central Green merges out as the winner. Singapore resale market was at low point in 2016-2017 period. Today many projects in city fringe / city have gone up at least 15%.
Today.. is Central Green still a good bet?
Central Green, a leasehold property with 70 years left in its lease, is at close to its all time peak price (which was achieved when it was a younger project with more lease remaining). What is the likely future movement of its price?
Unless enbloc is your end game, it is highly probable that Central Green has reached its peak.
In fact.. to revisit the earlier question, if we were to decide between Central Green and Highline Residences in 2017, with a plan to hold the property for the next 10 years, which project will emerge as winner?
From capital appreciation angle, Highline Residences is more likely to have bigger upward potential given its young age and rare supply in the area, as well as size-quantum factor.
From rental yield angle Highline Residences clock in average gross yield of 3.2% while Central Green clock in average of 2.8%. As the building gets older, the desirability for Central Green will also be affected and this gap will grow wider.
The above paragraph alone merit a long discussion on its own.
For example, why and when size matters?
This is why context matters.
While I am more bullish about the central area new projects, I am more cautious when it comes to suburb projects. We are seeing one bedroom unit at Florence Residences (Hougang suburb) transacted at $1,7xx psf, creating a $500 psf gap with relatively new resale condo nearby. This is where, again, context matters and I will favor the resale option for investment purpose.
Everybody says price point matters. But often the tricky thing is how do we assess the price point and conclude whether or not we are entering at the right price point? How did the developer convince buyers to pay over $1700 psf for their product? Surely they also use some ‘data’ to back them up?
Another example of often discussed topic- freehold or leasehold? That’s for another time but to give you a snippet of this interesting topic;
I did not mention that right opposite Highline Residences is a freehold project, Twin Regency. How interesting that Twin Regency has in fact more or less stagnated during the same period. What happened?
And here is another food for thought.
Martin Modern is the only 99 years leasehold project in this table. The rest are freehold projects surrounding it. The context is prime district 9 River Valley where freehold is the name of the game.
Question:
– Why have Martin Modern outperformed its freehold peers?
– Why did Starlight Suites & Urbana fade while Martin Place Residences stay strong? What do buyers look for in freehold property?
One of our common mistakes in selecting property is to use our personal preference as blueprint in identifying investment property. We need to realise that different property segment / area could have different type of buyers with different pattern.
Let’s discuss this on another post! If you like what you read here, do subscribe to my blog.
