New Launch Vs Resale Condos. Which One Appreciates More? Part 1

We all know what the essential differences between a new launch and a resale condo are. In case, you have missed out any points. Here are all the points in bullet form.

Characteristics of New Launches Versus Resale

New Launches
1. The condos are generally under construction and there is a waiting period of 2 to 4 years before collection of the key. Since you can’t rent the unit out. There is no rental income these few years.
2. Buildings under construction follow the progressive payment scheme stipulated by URA. Payment is incremental and is called for once a particular segment of the condo has finished construction.
3. Everything in the condominium is brand new including the facilities. As for individual units, most of them come pre-renovated with flooring, kitchen cabinets, bathroom accessories, appliances, air conditioning and in some cases, smart home features.
4. New launches are generally priced 20% higher in terms of psf compared to the surrounding resale developments.
5. You will only see the physical product after key collection.

Resale
1. Key collection happens ten weeks after exercising of OTP. Rental income is almost immediate. In some instances, you can even purchase units that come with the tenancy.
2. Payment is via private treaty. Full payment upon key collection
3. The condition is as is. For older developments, waterproofing works within the unit might be essential. Brand new appliances are almost necessary.
4. Prices are lower than new launches.
5. What you see is what you get.

New Launches Versus Resale. Which One Appreciates More?

Now that we understand the characteristics of both resale and new launch condos, the main question is which one appreciates more? Some people swear by purchasing resale because that is where you can find “gems” and undervalued properties where you can flip them later on for big bucks. While others, on the other hand, prefer new launches because there is a “10% gain” when the project obtains TOP(Temporary Occupation Permit) status. So who is correct, which one has more myth than fact?

My earlier article on J Gateway has already proven that despite having a higher price tag, the gains on the new launch are much more significant than the resale condo used for comparison within the same time frame. However, the question is this. Is this limited to only J Gateway? How about other new launches within the same time frame? Part 1 will use data from these recent new launches put up for sale during 2013 to 2015. This time frame is used because the seller is free from SSD(Seller’s Stamp Duty) and the data is most recent.

The Panorama Versus Meadows At Pierce

Comparison Between Meadows @ Pierce and The Panorama. Source: 99.co

  1. The Panorama is a 698 unit leasehold condominium located at Ang Mo Kio Avenue 2 launched in 2014. The closest resale comparison is Meadows @ Pierce, a 479 unit freehold condominium and completed in 2012.
  2. The Panorama was launched at an average price of $1288psf in 2014 while resale units at Meadows were going for $1101psf. Translating to an average of a 17% price premium over the resale.
  3. Today units at The Panorama are transacted at $1531 psf while units at Meadows are going for $1050psf. So if you purchased a unit at The Panorama back in 2014, you would have gained 18.87%. Meadows, on the other hand, registered a 4.62% loss.
Sky Vue Versus Clover By The Park

Comparison Between Sky Vue and Clover By The Park. Source: 99.co

  1. Sky Vue is a 694 unit leasehold condominium located at Bishan Street 15. The closest resale comparison used is Clover by the Park, a 616 unit leasehold condominium located at Bishan Street 25 and completed in 2011.
  2. Sky Vue was launched at an average price of $1432 psf in 2013 while resale units at Clover By The Park were going for $1225psf. Translating to an average of a 17% price premium over the resale.
  3. Today units at Sky Vue are transacted at $1770 psf while units at Clover By The Park are going for $1233psf. So if you purchased a unit at Sky Vue back in 2013, you would have gained 23.57%. Clover By The Park on the other hand only registered a 0.62% increment.
Principal Garden Versus Tanglin View

Comparison Between Principal Garden and Tanglin View

  1. Principal Garden is a 663 unit leasehold condominium located at Prince Charles Cresent. The closest resale comparison used is Tanglin View, a 384 unit leasehold condominium located at Prince Charles Cresent and completed in 2001.
  2. Principal Garden was launched at an average price of $1628 psf in 2015 while resale units at Tanglin View were going for $1210psf. Translating to an average of a 34.5% price premium over the resale.
  3. Today units at Principal Garden are transacted at $1826 psf while units at Tanglin View are going for $1286psf. So if you purchased a unit at Principal Garden back in 2015, you would have gained 12.12%. Tanglin View, on the other hand, registered half the gains at 6.25%
So Which One Appreciates More? New Launch Or Resale? 

By now, the answer should be rather obvious. In addition to my J Gateway article which used a condo in the west for comparison, the other examples are spread across the island. Despite having different locations, all four cases prove that new launches generally appreciate more than their resale counterparts. Why is this so? After all, common sense tells us that when something goes up, it must come down. So when you buy something at a higher price, it can only go down, right? Well, this famous saying coined in the 1800s used gravity as the logical explanation behind the phenomenon when you throw a ball up in the air. Unfortunately, the logic behind the real estate market does not rely on the simple effects of gravity but rather a complex mix of various factors. So it is much more important to understand these factors rather than the simple fact that prices are too high and can only go down. Or conversely, when something is cheap, the only way is up. So interestingly enough, common sense may help us most of the time but in certain cases, may not be logical.

So going forward, does it still make sense to buy a new launch? After all, there are around 60 plus upcoming projects in the pipeline that is launching soon. How about resale units? Are there places with potential? Or should you sell now because the only logical way prices can go is only downwards? Whatever the reason, talk to us first to understand the underlying factors that affect prices in the real estate market before you make a decision.

Read our other in-depth new launch analysis here! 

-New Launch Vs Resale Condos. Which One Appreciates More? Part 1

-New Launch Vs Resale Condos. Which One Appreciates More? Part 2

-Was J Gateway A Good Buy?

 

Article contributed by Jerry Wong

Jerry Wong is a realtor with Huttons Asia Pte Ltd. He loves coffee, cookies and condos. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home or make that capital upside in just a matter of months. Buy Jerry a coffee, and he will meet up with you on a 1 to 1 session to share the following

  1. How certain factors affect real estate prices. (Using historical transactions as references)
  2. Applying lessons from history to determine if a condo has the potential for upside or not. These condos can be those under construction, resale or the very one you are staying in right now.
  3. Or just prepare the toughest question you have on your mind! If it is interesting enough, the answer will be in a blog post and shared with everyone!

You can also subscribe to our Facebook page and receive the latest real estate updates in Singapore!

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