4 Ways How You Can Decide To Buy A New or Resale House


With a looming oversupply in both the new and resale property markets, buyers waiting on the side will be spoilt for choice in the coming years.

Given that a private property is big ticket item and an illiquid asset, one has to take into account other factors besides the location of the property when making a purchase.

These factors are not exhaustive but are meant to set you thinking when deciding on whether to get a new or resale private property.

Factor 1: Purpose For Purchase – Owner Occupation Or Investment

This might seem obvious but I feel that this is the most important factor when deciding to buy a private property – new and resale private property would cater to different needs.

Generally, a newly-launched project takes about three years before its Temporary Occupation Permit (TOP) is granted.

If one is unable to wait for the completion for owner occupation, it is obvious that one should consider the resale market, where the purchase would take at most twelve weeks to complete.

Alternatively, if one prefers a brand new unit, there would still be unsold units of condominiums launched a few years back which would TOP soon.

However, if it is for investment purpose, potential buyers can explore both the new and resale property market bearing in mind the other 3 factors below.

Factor 2: Freehold Or Leasehold

In Singapore, private property is either classified as leasehold with most having a 99-year lease from the time the developer bought the land parcel, or freehold. For the latter, I categorise properties with a 999-year lease as freehold given that the lease is almost in perpetuity.

Why does this matter? Simply because for a 99-year leasehold property, the owner would have to return the land to the State upon the expiration of the lease.

In Singapore, there are some landed, 99-year leasehold properties which are nearing their end. Their price would be much lower than other similar properties with longer lease.

Hence, if one intends to reside in or rent out the property for cash flow for the remaining balance of the lease before returning the land to the State, such properties would cater for them.

However, these issues will not arise if the properties are freehold as one can be assured that they can hold on to their properties in perpetuity.

For new properties or those which have a decent number of years before the lease expires, one can safely commit after considering the next two factors.

Factor 3: Condition Of Property

A new property has the advantage of the developer providing the guarantee that the condition of the property would be in tip-top condition when the owner collects the key.

However, buyers must be mindful of the showroom effect, where what is being displayed might not be the actual conditions as developers would represent as the units as best as they could (to their advantage in most cases.)

In this respect, buying a resale property confers one the advantage of “what you see is what you get”. One is able to visit the property at various times of the day to ascertain if the property matches one’s expectations.

However, the buyer of a resale property would need to note that he would have to renovate his property for most cases. While the per square feet (psf) price might be cheaper than a new property in the same neighbourhood, the savings would usually need to be catered for renovation works.

Factor 4: Value Of Purchase

Finally, I shall touch on the value of the purchase.

In the neighbourhood where I live, there are four 99-year leasehold condominium projects which have just TOP, the selling price psf is much higher than resale freehold units.

It seems to be getting common, where leasehold property is fetching a higher price than freehold property.

Which should you get then?

In this respect, you have to evaluate the value of the purchase vis-à-vis the condition of the new and resale unit.

All things being equal, you might get more value for money if you purchased a resale freehold unit in relatively decent condition as compared to buying a new 99-year leasehold unit.

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[image credits: www.findsingaporehomes.com]

 Loyang Valley, a 99-year leasehold project which has a low selling price psf. However, it has a lease of less than 70 years.

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[image credits: www.h88.com.sg]

Now consider Changi Garden, a project completed in a similar era as Loyang Valley, but is a freehold condominium.

It is clear which would offer you better value, if the price psf is similar.

[featured image credits: www.coolerinsights.com]

Does this help you make up your mind whether to buy your home brand-new or from the resale market? Let us know!

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LYS

LYS is a typical Singaporean in his 30s who is married with a son. Like many, he is interested money and has spent his time learning a lot about it. He likes to write and wishes to share his experience on his relationship with money.



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