PropNex Picks
January 17, 2022
Should You Buy a New Launch or a Resale Condo?
If you are in the market looking for a new home and could not quite decide between a brand-new launch and a resale unit, well fret not, this list should provide some help.
For a start, the key deciding factor lies in whether there is a need to move in or rent out the unit urgently. If there are more immediate needs, chances are you are better off getting a resale unit, or perhaps consider projects that have recently obtained the Temporary Occupation Permit (TOP). New launches could take 3 to 4 years to complete and will not be suitable if you are in a hurry to move or start generating rental income quickly.
If time is not an issue, then carefully assessing the points below should hopefully help you to arrive at a decision between going for a new launch or tap the secondary market for buying opportunities.
| New Launch | |
|---|---|
| Pros | Cons |
| New building and facilities New developments will come with modern facilities, sustainable features, and even smart home technologies | Waiting time for new development to be completed It could be a 3 to 4 years' wait and this could mean forgoing rental income for that period if the unit is meant to be an investment property |
| New launch pricing To get sales momentum going at the start of a project launch, it is not uncommon for developers to offer early bird discounts or star-buys. Generally, developers may change their pricing strategy at different stages of the launch, and you may see prices creep up as more of the units in the projects get sold | Uncertainty There is some level of uncertainty with a new launch, there is no telling who could end up being your neighbours, or whether the amenities around the area are adequate for your needs in the case of a new, non- mature estate. |
| Fresh 99-year lease Assuming it is not a freehold or 999- year leasehold property, a new launch comes with a fresh 99-year lease, making issues like lease decay less of a concern (at least in the next decade or two). This is also an important consideration if you are thinking of passing down the property to your children | Reality vs Show flat The quality of the completed project is also uncertain at the point of purchase as the development has not been built. In cases where there are extensive defects or where the actual development deviates from what was presented at the launch, the condo residents may face a lengthy tussle with the developer to have the defects rectified (at times stretching beyond the 1-year DLP) |
| Wider selection of units With a fresh launch, depending on balloting, you are likely to be able to choose from a wider range of unit options within a development, than in the resale market, where availability is subject to what is put up for sale by owners | |
| Payment schemes For new launches, you can tap on the Progressive Payment Scheme (PPS) which would be easier on the pocket as payments in instalment are made after each stage of the construction has been completed. This could range from 5% to 10% of the purchase price as the development is being built For newly completed projects (with Certificate of Statutory Completion), some developers may offer the Deferred Payment Scheme (DPS), which allows buyers to pay a down payment of up to 20% on the property and settle the remaining balance about two to three years later | |
| Defects Liability Period (DLP) Developers are responsible for any defect that occurs in the unit, the housing project and the common property within 12 months from the date of Notice of Vacant Possession, also known as the Defects Liability Period (DLP). During this time, the developer is obliged to fix the defect at its own cost and expense | |
| Lower maintenance cost With newer building and facilities, the maintenance cost will likely be lower than that of a condo development that is say, more than 20 years old | |
| Resale Condos | |
|---|---|
| Pros | Cons |
| Ready for occupation / rental Unlike new launches, resale units are ready for move-in or for rental almost immediately. In the case of the latter, it also means you can potentially start collecting rental much sooner than if you had bought a new launch that is yet to be built | Lease decay If the development is a 99-leasehold property, be sure check its lease balance. Lease decay refers to the running down of a property's lease and the negative impact on the value. Typically, a property's value will diminish as it gets older; there may be a smaller pool of buyers for the property as financing becomes more difficult to obtain for aging properties |
| Opportunity for good value buys In a distressed sale situation, there is a potential to snag an under-priced unit if seller is in urgent need to dispose of the property | Older facilities and building The development's facilities will be older and likely look dated. In addition, it will also be costlier to repair and maintain an ageing building, including plumbing pipes and systems |
| Certainty There is greater certainty in buying a resale unit as the development is already completed and you are able to visit the unit to conduct a thorough evaluation of the property. You will also be able to assess the surrounding amenities and transport network (e.g. is traffic jam a common occurrence at peak hours?). In addition, you will probably get a sense of who the neighbours are by observing the surrounding units | No Defects Liability Period (DLP) Unlike new launches, a resale unit does not come with a 1-year DLP. The onus is on the buyer (i.e. you) to carefully assess the unit's condition prior to purchase. Be meticulous, does that rug in the living room hide a cracked tile underneath – things like that is important particularly if you do not intend to replace the flooring? |
| Potential savings on renovation In the off-chance that you are able to secure a unit that is well-maintained and well-renovated to your liking, you may end up saving a tidy sum (not to mention time and effort) on renovation | No progressive payment / Cash over valuation In the resale market, there is no Progressive Payment Scheme. You, the buyer, will have to pay 25% down payment (assuming no existing housing loan) – including booking and option fees – when the sale is completed. Thereafter, you will start making monthly repayment straight away. There may be stiff competition for resale units in a good location or have extremely attractive attributes. This could drive up the asking price. Do note that if the purchase price is higher than the valuation, the portion that is over valuation has to be paid in cash |
Whichever path you take will depend on your financial ability and housing needs, as well as whether the property is for own stay or investment. Still not quite sure? Well, feel free to connect with PropNex’s experienced sales persons for a more detailed review of your financial circumstances, real estate requirements, and potential buying opportunities.
