Is Buying New Homes Really Better Than Resale Ones?
Updated: Mar 5, 2021
You are being invited to yet another new VIP launch this weekend!
Newspaper headlines state more than half of the units launched are being snapped up by buyers!
Real estate agents post on Facebook showing buyers queueing to ballot for units in showflat!
Is buying new homes really the way to go?
Lets look at the statistics.
The number of resale transactions plunged 31 percent from 13,009 units sold in Year 2018 to 8,949 units in Year 2019.
Conversely, new home sales rose 12.7 percent, with 9,912 units sold in Year 2019 as compared to 8,795 units sold in Year 2018.
So, is buying new homes really better than resale ones? Let's look at some of the pros and cons of buying new homes.
PROS OF BUYING NEW HOMES
Brand new building with modern facade and facilities.
Who doesn't like the shimmering new facade and brand new facilities? Buying new homes means getting a brand new building and new facilities as compared to a resale property.
Comes with a 1 year defect liability period
All new homes come with a 1 year defect liability period provided by the developer. This gives you peace of mind against poor workmanship or faulty appliances.
Many choices to choose from during launch
Instead of only units put up for sale by sellers of resale properties, buyers are being offered more choices in a launch. You can select a unit based on your needs and budget.
Buying new homes allows you to make progressive payment towards completion. This means you are making payments over a few years instead of a lump sum within a few months.
This is an important consideration especially for buyers whose concern is cashflow.
I was helping a young couple in their first home purchase.
This couple just started working not long ago. They do not have a lot of savings. They paid the booking fee of 5%, and 15% within 8 weeks (and securing a bank loan for 75% of the purchase price). For the balance 5%, they are able to wait for a few months (depending on the progress of the project) before developer call for the payment.
This gives them more time to save for the 5% payment.
Longer loan tenure as compared to the very old properties
New homes come with brand new lease. Bank stipulate that the balance lease of the property must be at least 30 years at the end of the loan tenure.
So buyers, especially younger buyers, may face a shorter loan tenure if they are buying older resale properties as compared to new homes.
More flexibility in using CPF to finance the property
If the remaining lease of the property cannot cover the youngest buyer to at lease 95 years old, CPF usage for the property will be pro-rated. Thus younger buyer will be able to use more CPF if they buy new homes as compared to older resale properties since new homes come with a brand new lease.
CONS OF BUYING NEW HOMES
Longer lead time to completion
New homes typically take around 3 years before it is ready for move in. For a unit launched say in Year 2020, the TOP is normally in Year 2023. This makes it unsuitable for buyers who need to move in fast.
Cannot see actual unit
As the project is not built, buyers cannot see the actual unit and can only buy through looking at showflat and visualising how the actual unit will be like using floorplans.
Smaller and not as spacious
The trend for new homes seem to be heading towards units with smaller area. It is not difficult to find 900 to 1000sf area for a 2 bedrooms unit in resale properties. However, many 2 bedrooms new homes are around 700 to 800sf nowadays. Developers try to make the units affordable by decreasing the floor area.
PROS OF BUYING RESALE PROPERTIES
Now let’s see what resale properties can offer.
Shorter lead time to completion
Legal procedures to the transaction can normally be completed within 3 months thus buyers can move in much faster as compared to new homes.
View actual unit before committing to the unit
“You see what you get.” Buying resale properties allow buyers to view the actual unit rather than designer decor showflat and floorplan. This prevents surprises when buyers collect the keys to their unit.
Price is normally lower
Psf price of resale properties tend to be lower as compared to new homes, due to the aging lease and older facade and facilities. However, do note that as older resale properties tend to be more spacious, quantum price might works out to be higher than new home.
A good example is in Meyer road, where there is a good mix of older resale properties and new homes.
It’s interesting to see the recent average psf transaction prices for these properties reflecting their respective age:
Hawaii Tower (TOP 1984) : $1,408
The Makena (TOP 1998) : $1,559
The Seafront on Meyer (2010) : $1,794
Psf price of older project tend to be lower than new homes.
Immediate rental income
Buyers can expect immediate rental income since there is shorter lead time to completion. Some resale properties are sold with existing tenancy so buyers can save time and money looking for new tenants. This means lesser months of vacancy and thus more rental.
Demand for rental units in Singapore is quite constant and healthy. For Year 2019, rentals of non-landed properties increased by 1.4%, 2.0% and 2.7% in CCR, RCR and OCR respectively.
Source: URA website
CONS OF BUYING RESALE PROPERTY
Older building and facilities
As compared to new homes with brand new building facade and facilities, resale properties are older. This might not appeal to buyers who do not like aged buildings.
Price quantum might be higher
Resale properties are normally more spacious. Bigger area means higher price quantum. This might limit buyers who have a smaller budget.
In conclusion, there are both pros and cons to purchasing a new or resale property. If you would like to discuss your options, make an appointment with me for a non-obligated discussion!
See you soon!
About The Author
Vivian is an experienced real estate agent who has been in the industry since 2002.
Over the years, she has transacted numerous property deals including HDB and private properties. She is well-versed in policies and regulations involving the sale and purchase of residential properties. She has also handled many transactions involving complicated situations like contra, divorce, administration / probate cases, and decoupling / part-share purchase.
Vivian is also a mother to 2 boys. Being a real estate mom allows her to spend much time with her children as they were growing up. Both boys are avid footballers representing their schools and clubs. She loves watching their games and hardly miss a game whenever they play.
Vivian is an active real estate salesperson and team leader. Call her at 98577714 for your real estate matters, or if you are looking to join the real estate industry.