Why pick a new property over a resale for investment?

By EdgeProp Singapore

/ EdgeProp |

August 1, 2018 6:30 PM SGT

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Some developers are now offering add-ons and discounts to offset higher ABSD rates and stricter loan limits from the new cooling measures.

Buyers of under construction properties can potentially save more on home loan interest rates.

However, older resale properties tend to be larger and more affordable.

Malaysian-listed developer, SP Setia offered buyers a 5% discount at the launch of Daintree Residence on July 28

Singaporeans have a love affair with property, as the stability and growth potential associated with real estate investments prove too great an opportunity to pass up.

When done properly, investing in property can indeed offer a number of benefits for individuals, including the ability to diversify income streams and to capture long-term capital appreciation.

Here, a dilemma that typically arises is whether to purchase a new property from a developer or one from the resale market.

New Sale vs Resale Properties: What’s The Difference?

Source: URA

If you are looking to purchase a home, here are a few reasons why investing in a new property from a developer instead of a unit in the resale market might offer more value for your money.

1) Developer add-ons and incentives

In response to the latest property cooling measures, some developers are now offering add-ons and discounts of up to 5% to offset the higher Additional Buyer’s Stamp Duty (ABSD) rates or stricter Loan-to-Value (LTV) rates to incentivise first-time homebuyers.

This is because with the marked increase of ABSD on investors and foreign buyers, the demand base for new properties will likely shift towards first-time homebuyers. As such, some developers are recalibrating their offerings to match the needs of these buyers.

For a start, Malaysian-listed developer, SP Setia offered buyers a 5% discount at the launch of Daintree Residence on July 28. The 327-unit project on Toh Tuck Road was the first project to be launched following the new cooling measures that kicked in on July 6. It saw a take-up rate of 50 units out of the 80 units released, at an average selling price of 1,710 psf.

Units at Daintree Residence also come with have kitchen systems from the European brand De Dietrich, and bathroom accessories from German brands Hansgrohe and Duravit.

Meanwhile, Singapore-listed property group, Oxley Holdings has also announced that it will be “absorbing” the 5% ABSD for buyers in some of its upcoming projects. They include the boutique development, Parkwood Residences on Yio Chu Kang Road. The 18-unit leasehold project is slated to launch later this year.

Potential buyers at Daintree Residence sales gallery on the first day of launch on Jul 28 (Credit: S P Setia)

2) Lower move-in costs

The main appeal of buying a new property is that owners benefit from the latest facilities and design, and do not have to fork out unnecessarily for renovation and repair costs. Like it or not, older resale properties may come with issues such as choked plumbing, yellowing walls, damp ceilings (usually from air-conditioning leaks) or failing water heaters.

Complete renovation works can include carpentry, electrical wiring, plastering, flooring, painting and wet works that can add up to tens of thousands of dollars or more.

Remember, these costs are not included in your home loan and you will have to fork out of your own pocket, so you may want to factor in such additional costs before buying a resale property.

On the other side of the coin, older resale properties do tend to be larger and more affordable, such as these older freehold apartments priced below $1,000 psf. So do consider your needs and budget wisely before making a decision!

3) Greater upside of appreciation

If your long-term objective is investment, purchasing an under construction property may offer better opportunities for potential capital appreciation.

Besides the monetary savings arising from an early purchase, buyers of Building-Under-Construction (BUC) units also stand to score a lower loan interest rate, compared to loans for completed properties. Further, a BUC loan follows the progressive payments scheme, in which a certain percentage of the loan is disbursed at different stages of the property construction.

One way to assess if a property has potential for strong capital appreciation is to pay attention to government planning, as well as plans for infrastructural development such as public transport links. Traditionally, properties located near MRT stations or popular schools tend to see better capital appreciation in the long term.

Investors are also likely see a greater upside of appreciation due to higher demand for newer properties, as they are more likely to attract a larger tenant pool and hence maximising your home’s rental potential.

It is, however, important to note that infrastructure development is a process that can span for years, if not decades, and buyers will need to ensure that they have sufficient holding power and a healthy dose of patience before making a purchase.

Looking to buy your first-ever property but not sure where to start? Learn how you can make better and faster property buying decisions with the right research at Data & Drinks: Property Buying 101

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