There’s been a surge of new condos launched in the past two years – over 50 new launches in 2019, and probably over 30 new launches this year. These new developments have “stolen the thunder” from the resale options currently out there. But as we head into the aftermath of Covid-19, some buyers will be asking: is it better to opt for a new, under-development condo still, or look for a lower-priced, resale counterpart?
In this article, we’ll look at the arguments for each of the two options:
1. UP-TO-DATE FACILITIES
Condos built in the ‘90s and earlier tend to have facilities that are less popular today. One common example would be squash courts – unless you happen to play squash today, you probably won’t have much use for this facility; but it’s very common in condos built in the ‘80s and ‘90s.
Some facilities that we take for granted in new condos today may be lacking in older condos. For example, diving pools were not common in condos until around the mid 2000’s; and facilities like rock-climbing walls, concierge services, and smart home access were unheard of before the last decade.
Squash court turned into table tennis room.
You also need to consider the state of the facilities. Some condos built before 2000 now have defunct facilities, such as jacuzzis and sauna rooms that are no longer functioning. Likewise, gyms and pools are in varying states of maintenance, depending on the management – make sure you’re not getting a pool that’s dirty and choked with leaves, or a gym full of rusting weights and broken treadmills!
Note that this isn’t true of every condo. Some good management committees have managed to upkeep the development well, or even upgrade them. For example, despite being one of the oldest condos in Singapore, Pandan Valley is often held up as the gold standard of condo management.
As late as 1995, the management still managed to get residents to pool $5 million for upgrading works ($5 million was no small amount in the ‘90s!) The condo was completed in 1978, so getting this to happen 17 years down the road was quite a feat.
But Pandan Valley is an exception, and don’t expect every older resale condo to have done as well.
2. LESS WEAR AND TEAR
With regard to the unit itself, an older unit is bound to have more wear and tear as compared to a new condo. Water heaters may not work, air-conditioners may need replacing, and white goods – like washers and dryers – may not be in the best condition.
Be especially wary of ceiling leaks, as these may be caused by aging pipes in the unit upstairs. If you buy such a unit, you’ll have to convince your upstairs neighbour to fix the issue; there’s not much you can do.
Remember to factor in the likely cost of such repairs, when weighting up your decision to buy.
3. EARLY BIRD DISCOUNTS
Property developers incentivise new buyers through early bird discounts. Usually, the earlier you buy the better the discount.
For example, phase one of the new condo launch typically gives you the best discounts, and the developers then tweak the prices based on the response – but they almost never make it cheaper than the first phase, for fear of angering earlier buyers. Imagine, would the first batch of buyers be happy if they found out they paid more and still have to wait a longer time for the new condo to be finished. They may never trust this developer again.
These discounts are usually disclosed only through direct negotiation and are not too transparent. If you need help here or want to know if you’re likely getting a fair deal, drop me a message. I can look up the development for you.
Which has more financing issues?
4. FEWER FINANCING ISSUES
When you buy a new condo, the bank will usually take the developer’s price as a fair indication of value. So if the developer sells it for $1.2 million, the bank’s loan will be disbursed according to the price of $1.2 million.
For resale condos, there can be a difference between the seller’s asking price, and the valuation that the bank accepts. For example, if the seller wants $1.21 million, but the bank accepts a valuation of $1.2 million, then you need to cover the excess $100,000 in cash.
Banks also lower the loan amount based on the property’s remaining lease. For example, the maximum financing may fall to as low as 55 per cent for properties that are past 60 years of age; and there is usually no loan possible if there are 30 years or less on the lease. But lease decay is never an issue with a brand-new property.
Resale condo may cost more to renovate.
5. CAN BE CHEAPER TO RENOVATE
It can sometimes be cheaper to renovate a new condo than a resale unit if your interior design plans are not too lavish.
The simple reason is that, with a resale condo, there are already existing renovations in place. You may need to pay an additional cost to hack away the old interior, before you can start laying down a new one. It’s thus possible that – after everything is accounted for – the resale condo leaves you a higher contractor bill.
Resale condos have their advantages too.
1. CAN MOVE IN IMMEDIATELY
For homeowners, one of the main attractions of a resale condo is that you can move in fast (often about a week after completing the transaction). A new condo may take anywhere from two to three years to complete.
If you need to rent during this time, be sure to factor the ultimate cost to you. Two to three years of rent can be quite a substantial sum; and you’ll also need to be prepared to move house at least twice.
2. RENTAL INCOME CAN START RIGHT AWAY
If you are buying purely for investment, you can even buy a property that’s already tenanted, and receive rental income right away.
This isn’t possible with new condos that are under development. There’s nothing to rent out yet, and you need to wait till the Temporary Occupancy Permit (TOP) is granted to get tenants.
3. YOU CAN SEE WHAT YOU’RE GETTING
There is less risk with resale condos, as what you see is what you get. You can inspect the actual location, see all the little cracks, check the actual view, etc. There are no nasty surprises after you’ve put down the payments (not if you check the unit thoroughly).
Outside the unit, you can actually inspect the facilities. You can tell if the pool is too small, there are often too many users in the gym, and so forth. These factors are all invisible in new condo launches.
Some buyers prefer to see the real actual house and facilities.
4. ESTABLISHED TRANSACTION HISTORY
New condo launches are a bit volatile in terms of the rental you’ll get, at least until after the first two or three years. At the start, no one really knows how much more a tenant will pay compared to existing alternatives or other new launches.
Likewise, any estimates on gains are more speculative, compared to a resale condo. A resale unit already has a history of sales and rental transactions, making them more predictable as investments.
5. MAY BE THE ONLY WAY INTO A MATURE NEIGHBOURHOOD
Sometimes, a neighbourhood is so built-up, there are just no new condo launches likely. This can significantly push prices up for what resale units there currently are in the area. In Marine Parade, for example, some people may balk at Marine Blue – a development where even a two-bedroom unit can cross the $2 million mark. But the development is right across from Parkway Parade and the upcoming MRT station; and it still draws interest, as there aren’t many new condo launches likely in the area.
SO WHICH OF THE TWO IS BETTER?
As you can see, neither is inherently better – it depends on your personal needs. If you absolutely must live in a certain mature location or must move in right away, then you may not have a choice but to accept resale.
On the other hand, if you can wait for your new condo to be built, it can be emotionally satisfying to be moving into a brand-new home, with cutting edge facilities.
If your intention is high gains or rental yield, however, then we need to take a more precise look at the property and its surrounding competition. For those purposes, speak to me and I can help you make an informed comparison based on live statistics and market trends.
Justin Kong is a passionate real estate consultant who enjoys sharing property investment insights through his property blog Aspiring Property Investors.
Today, many homeowners have benefitted from Justin Kong’s proven strategies to help them accumulate wealth safely through their property investments.
Justin Kong is also a team leader with a strong belief in helping groom future real estate producers and leaders.