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  • Writer's pictureSerene Phua

Spoilt for choices! Deciding between new projects or resale units for your property investment...

Updated: Jun 16, 2020


property investment

“The minimum retirement age in Singapore is 62 years old, where can I get income after I retire?”

Does this sounds familiar? I am quite certain you are nodding your head right now.


With inflation and many other factors, it is not possible to retire without any funds at all, once we stop working.


I believe many of us would welcome the idea of having income while enjoying our retirement.

With the various types of investments in the current market, property investment is one option that many would consider.

property investment


Having a property gives one the flexibility to either collect rental income or to sell off the property so as to cash out the profit when the property market is good.





Through my years in the real estate business, I have come across many clients and friends purchasing their first investment property. There is always this common question that they will ask: “Should I purchase a resale condominium unit or get a new project unit?”




Resale condominium units and new project launches both have their pros and cons as investment property.

 

Below are several factors that I share with my clients, to allow them to consider their needs as well as their long term goals while on their property search.

1) Size of unit

Resale condo units are typically more spacious, from the bedrooms to the kitchen and yard.


Families with children will enjoy the vast space their kids can move around; large families will love the huge area where everyone can have their own space yet mingle at times. Many expats bring along their families when they are posted to work here in Singapore.

returns of investment

New project units are generally smaller in size. Most of these new project units, enclosed kitchen is only available for 3 bedder units and above. Otherwise, open kitchen concept is the way to go for the smaller units.

2) Quantum

Let me give you 2 illustrations on this:


New project unit – 99 years leasehold, 2 bedder unit on high floor, floor area of 785sqft, price at $1,550/- per square feet, equates to about $1.22 million.


Resale condominium unit – 99 years leasehold, 10 years old project, 2 bedder unit on middle floor, floor area of 990sqft, price at $1,380/- per square feet, equates to about $1.366 million.


Although the quantum is higher for resale units, the space that comes with it, is one of the factors that investors put into consideration before purchase.


3) Renovation Costs

One advantage of new project units is that there is minimal renovations costs.

Below are a list of items that developers will provide typically, even a studio apartment!

- Brand new air conditioners,

- Kitchens are equipped with quality kitchen tops,

new launch

- Practical kitchen cabinets

- Built in wardrobes in the bedrooms,

- Even the bathrooms are well equipped with brand new fittings,

- Quality flooring are also done up for these new units,

- Not forgetting, sometimes even refrigerators and washer cum dryers

Basically, the two things that investor needs to do is to put in the lights as well as curtains/ blinds and the unit is ready to be rented. As some tenants may have their own furniture, there is no requirement from the landlord to purchase furniture. I usually advise my investors to market the unit before deciding whether to purchase any furniture.


Resale condo units are usually renovated to the sellers’ preference and may not suit all. Based on my experience, most of the buyers who buy resale units factor in the renovation costs into the purchase price.


new projects

This is because the renovation costs can be quite significant, depending on the extensiveness of the renovation required. The selling price of the property may be slightly higher for well-maintained units with minimal renovation.

4) Location

Some resale condo units may not be as convenient, especially projects that are older in age. These projects are probably a distance away to the train station or bus stops. The nearest amenities may require a good 20 to 30 minutes walk. One example is a freehold project of about 40 years old District 21, the nearest amenities would require a bus ride of about ten to fifteen minutes. This explains why the older projects have some amenities within the project, to allow residents to do essential marketing for their daily needs and essential services.

Mixed developments, residential units above shopping malls, are increasingly common in recent years. Many tenants are willing to pay higher rental for the convenience of amenities and transportation. I have served tenants who specifically only want units from such developments, these tenants share with me that the higher rental prices are worthwhile for the convenience they get.

5) Rental yield

Resale condo units have readily available data on the recent transacted selling prices as well as the rental prices. This allows the investor to have a better understanding on the rental yield for that project.

New project units do not have available data for that particular project, since there are no rental transactions at all. The rental prices that can fetch and the rental yield are typically estimated from the nearby projects’ transacted rental prices.

The risk for new project units may be higher as the rental yield is very much dependent on the take up rate of the units during the TOP period.

6) Rental income

investment with property

Typically, new project units needs to wait about 2 to 3 years before you can rent out the property to collect rental income. However, progressive payment schedule for new project units is one way to allow investors to manage the finances until the rental income comes in.


One main reason for purchasing resale condo units is the immediate rental income after completion, especially for units that are purchased with tenancy.

7) Capital Appreciation

Let me show you comparison between two similar leasehold projects within the same area, Tanglin View completed in 2001 and Principal Garden launched in 2015.

investment
capital appreciation

Source:99.co

Principal Garden was launched in 2015, selling at an average of $1,600/- psf then, with Tanglin View resale units selling at an average of $1,200/- psf.

Within a time frame of 5 years, the units at Principal Garden are selling at an average of $1,850/-while the units at Tanglin View are still unable to cross the selling price of $1,300/- psf.

Looking at the figures, it seems more reasonable to consider purchasing new project units instead of resale units should the intention be to dispose of the property to cash out the profit after a few years.

My Case Study:

My client referred his nephew, Jansen to me in early 2013. At that time, Jansen was looking to purchase resale units for investment. Jansen only wanted properties in the West area as it is the place where he spent his memorable childhood days.


“I want to get either a bigger property or own a second property in a couple of years”

This was what Jansen shared with me when I first met him for a discussion over coffee.

After some time of property search, he liked this particular 3 bedder unit at Parc Oasis, three minutes walk away from the MRT station. Everything was suited to his requirements, the location, the project, it was a well maintained renovated unit, the price.

However, I remembered through our viewing sessions and discussions, I also shared with him on one upcoming project launch, J Gateway that year, the prices were expected to be pretty high at that time. It was conveniently located next to Jurong East MRT station, three major shopping malls, Ng Teng Fong Hospital and walking distance to International Business Park. He was concerned on the rentability of the units there as well as the price, it was a little out of his budget.

After much discussion with Jansen, he decided to try balloting for a unit there and the crazy queuing started. Eventually, Jansen managed to get a 2 bedroom unit, although he paid a slightly higher price than what he initially wanted to spend for.





He sold the 2 bedder unit last year and made a profit. He is now a proud owner of 2 private properties.




Looking at the statistics below, there was a higher capital gain for the new project launch compared to the resale condominium unit. With the correct investment unit he has chosen at that point of time, the unit was never left vacant for more than 1 month since he collected keys and did some basic furnishing, the rental income just keeps coming!

new launch, resale

Property investment is very subjective. Some investors may prefer resale units while some may like brand new project units.


Ultimately, it is your needs to match the type of investment property to purchase.

Still cannot decide which property to get for your investment?

Pick up your phone and connect with me at 8687-7778.

I am more than happy to share with you my experience and thoughts so as to assist you on getting a suitable property investment of your needs.

 

Need advice on your property portfolio?

Need assistance to buy/ sell/ rent your property?



Select your convenient date and time for me to share more with you in details on Property Wealth Planning.


 

About The Author


serene phua

Serene is the Senior Associate Director of Orange Tee & Tie and has been in the real estate business since 2013. Through the years, she has assisted many clients in their different property needs. Many of these clients eventually become her friends over the years, something that she is very thankful for.


She is a fan of TV serials, Hong Kong, Taiwan, not forgetting local productions too. Singing is her way of releasing stress, especially with her ktv khakis. Whenever she gets to travel, her number one choice is definitely Taiwan, the food and the shopping is awesome! :)


She is also a mother to two lovely girls , elder sister is a bubbly 7 years old girl with the younger one coming to the terrible 2 this year. They are both her pride and joy, the elder one often helps out in the little things such as folding mailers in Serene's real estate business too.










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