I previously wrote about Looking for Capital Gains? A Comparison of New Launch vs Resale Condos on the difference between a new launch property and a older properties in terms of capital gains.
It actually received a lot of attention.
Some of the feedback from my readers was that they still preferred an older property as compared to a new launch property.
You may wonder why some people still prefer to invest in older properties?
New properties have a more modern and creative appearance with latest fixtures and fittings.
So what might be so attractive about older properties that people still choose an older development – instead of a brand new one?
Again, there is no right or wrong answer here.
People have different needs and requirements and thus an older development might serve them better.
Back in February 2020, I had the opportunity to speak with a reader who wished to know more about the new launch at Kopar at Newton which is located at Kampong Java Road.
Given the demographics of the residents in that area, the easy accessibility to amenities and close proximity to reputable schools coupled with being located on a rare large piece of residential plot of land that the new development is sitting on – it obviously attracted strong interest from the public.
The above development sounds like a good deal to invest in but the prospect did not even arrange a visitation to the show gallery.
Further conversations revealed the following:
- She was sourcing for a 3 bedder unit in that area and have a family of 5 and was looking for own stay
- She felt that the 3 bedroom layout at ‘kopar at newton’ were too small as she needed a larger unit
- She was hoping to get a size of approximately 1300sqft in a new launch development with a proper kitchen and a backyard area.
In my opinion, she was looking at the wrong place as a 3-bedder apartment of that size can mostly be found in older properties.
A 4-bedder in that development will probably suit her needs but she do not wish to stretch her budget.
Eventually she shared her actual plans was to invest in a spacious but an older property.
The plan is stay put for a while and rent out the apartment at some point till the development triggers an enbloc sale.
What is important is that she gets clarity on what are her property plans and whether it helps to achieve her goals.
As long she has a clear idea about her future plans, then it should be fine.
For her – it is about having a long term investment plan. It is not always about getting the highest return in the short term period.
The above example shows that some people still prefer a resale property over a new launch property – despite the fact that a new launch offers.
Here are 5 main reasons why:
#1 – Older properties usually have a much larger living space
Resale properties typically have more living space than the newer properties.
- A big family might have to settle for an older property especially if one is so used to staying a spacious layout apartment
- Another possibility is those who previously stayed in a landed property are so used to the massive living space. For them, they are likely to opt for an older but smaller size condominium with a spacious layout.
- This is commonly seen especially when they are getting older and their children has started to move out.
Today with the shrinking sizes in newer residential developments – not everyone can accept such reduced living spaces.
Let me share with you a few examples
- In older properties – it is usualy an enclosed kitchen coupled with a backyard area and utility toilet. This way everything from cooking to clothes washing related are settled in the kitchen area. This kitchen concept will be preferred if you are a person who loves to cook and very often at home.
- Contrast this enclosed kitchen with the open kitchen concept of a newer development.
- In newer properties – you might find a bathroom configuration that is interconnected to both living area and master bedroom. This jack and jill concept are commonly seen in newer 2 bedder apartments. You might not like this concept if you are a private person. And in my experience, alot of people will not even consider this layout if they have a big family.
- Some buyers like having a huge dining table or huge sofa. These people might go for older properties which comes with spacious and better layouts which make them feel homely and comfortable.
Regardless of new or old properties – all buyers are always looking for spacious and efficient layout instead of wasted space.
Space constraints are an important aspects that one needs to take into consideration before one commits to the purchase.
This is because if your apartment layout is not ideal:
- You will have difficulty in selling your place in future as buyers will have objections not to buy from you.
- You are unable to command a higher price for your apartment.
#2: Older properties usually are priced lower as compared to a newer development
Generally, older properties are much cheaper than newer or new launch properties.
Using Amaryllis Ville – which is a 15-year old development and a new launch development like Kopar at Newton as a comparison – we can see the differences in prices.
Both developments are located in close proximity to each other and have similar attributes.
- Amaryllis view which is completed in 2004, a 3 bedroom with a size of 1259 sqft was transacted at $1548 psf ($1,950,000)
- Kopar at newton which was recently launched, a 3 bedroom with a size of 958 sqft was transacted at $2228 psf ($2,134,000).
Given the bigger size and lower quantum, a buyer looking for an own stay or for investment might opt for Amaryllis View.
There are many different reasons why any owner is looking to sell their home:
- The inability to service the mortgage – resulting in the sellers will be in a rush to liquidate their property in a fire sale
- The sale might be triggered due to a dissolution of marriage
- And of course, the owner has decided to liquidate the property for retirement reasons – with the sale proceeds to downgrade to a smaller sized property and the remaining cash to enjoy retirement.
Unlike investing in a new launch from the developer – you are dealing with individual sellers.
Therefore in most cases – there is always room for negotiation on the selling price – which you can always bargain with the seller.
With the current abundant supply of private resale properties in the market and coupled with the current covid-19 outbreak – it is highly possible to get a solid opportunity and a good deal in the resale market in the coming months.
#3 – Able to move into the resale property within weeks
As shown above, it only takes approximately only 2 – 3 months to go through the resale buying process.
You will then need another 1 – 2 months to renovate the place depending of the extent of the renovation.
Contrast this to a new launch property which will take at least 2 to 3 years before you receive the keys to your new apartment.
But what about those who wish to sell their existing HDB flat and do not wish to rent a place after that for some financial reasons?
For this group – they might want to consider to upgrade to a private resale property instead of waiting for a new launch.
You might want to start searching for suitable properties 2 to 3 months before you start marketing of your current flat.
Look around for available options and then shortlist them based on your criteria.
Work with a banker to go through your loan eligibility amount.
This way – you are mentally prepared on what to expect before you commit to the purchase.
Discuss with your housing agent whether is it possible to get a ready buyer for your current apartment.
For this back to back sale transaction to work – you may need to seek 2 or 3 months extension approval from the buyer before you even grant the sales option to them.
This ensures you have ample time to secure your new place and carry out renovations.
#4 – Be able to view the physical condition of the resale property unit
With a new launch property – you can only see the mock up unit at the show gallery and visualize what it’s gonna look like in future when you collect the keys.
But for resale properties, you have less surprises as you are able to inspect the physical conditions of the place before you even make an offer to the seller.
You know what will need to be repaired and you can use your own trusted contractor that is able to quote you the renovation costs and also advise you the time frame.
This way – not only you are able to work out your sums beforehand – you are also able to prepare mentally on what to expect with the time frame given.
#5 – Be able to collect passive income almost immediately
You can start marketing your place to look for suitable tenants almost immediately.
One of the most common reason for choosing a resale investment property is because you are buying for investment purposes.
In fact, most investors will prefer to invest in a property when it is tenanted, as they will want to use the rental income to offset their monthly mortgage or at the very least – subsidize a part of it.
As such – it is not surprising that some investors will consider resale units to invest into.
Moreover rental income is more or less predictable.
By looking at the past transactions of the development or neighbouring developments – it will gives you an indication on how much monthly rental you are able to fetch for your investment property.
The above examples should be able to help you in making better decisions if you are searching for an older property.
I believe there are other reasons why people choose an older property over a newer one.
The above are some examples that I had experienced with buyers whom I served over the years.
Perhaps with the current covid-19 outbreak – which could take about 4-6 quarters to settle down – you might be lucky enough to find an underpriced unit in the resale market.
Most importantly with a clear and calm mind to make financial preparations – you can then become more mentally prepared when you are ready to commit to the purchase.
In fact – nobody is able to predict what will happen to the property market.
I’m not saying that history will repeat itself especially with reference to the global and Asian financial crisis.
Why? This outbreak is unprecedented.
If you are considering entering into property investment as a way to ride into the upwards trend, I invite you to contact me for a discussion.
Everyone has different financial resources and backgrounds – so you will need your own customised solutions.
This is a no-obligation session where we can do a financial assessment and simulation to weigh all your various options available.
During our discussion, we can explore your untapped funds that are sleeping…. and channel it towards properties that can provide better performance than your existing ones.