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New or Resale Property – Which One Is a Better Investment?

Wednesday, March 30, 2011

The following post is excerpted from the newly launched Secrets of Singapore Property Gurus, in an interview with Getty Goh, Director of Ascendant Assets.

Based on the research my company has done, we found that buyers will have a higher chance of getting value-for-money deals by buying resale properties. If you think about it, it is actually quite intuitive. After all, developers are in the business of selling properties for profits. With many of them having ample financial reserves, how cheaply do you think they will sell their new units for? 

Resale properties on the other hand are bought from other owners, who can be selling for a variety of reasons. While some of the homeowners may be savvy investors, there will definitely be others who need to dispose their property urgently and are prepared to sell their unit at a discount.

It is possible to get a good deal on a resale property

I have personally come across numerous value-for-money deals. Let me share one such deal that my company helped a client secure. In late 2009, I was helping a client find an investment property. As he did not want to over-stretch himself, the investment budget was set at $700,000. After several weeks of searching, we eventually found a suitable unit that was going for $650,000. Based on my company’s research, we knew that it was a good deal as the asking price of similar sized units in the same development was about $100,000 more than the asking price for that unit. In addition, we found out that the seller was parting with his property for a loss of more the $50,000. All these were indications of a value-for-money unit and we were confident that my client would have easily made a tidy profit had he decided to flip the unit.

We later found out that the owners were willing to let the unit go at a discount because they were going through a divorce and wanted to quickly divide the assets. From this experience, it reaffirmed my belief that there are plenty of good resale deals. It is just a matter of how diligent we are in our search to find them.

The benefits of buying directly from the developer

That said, I am not implying that buyers should totally avoid new sales as there are advantages to buying properties direct from developers. Firstly, when someone buys a property directly from developers, they will be entitled to a one year Defects Liability Period (DLP) that starts when the development receives its Temporary Occupancy Permit (TOP). During the DLP, any defects found will be rectified by the developer. Resale units do not have such liability periods and buyers will have to rectify any defects at their own expense.

Another advantage in new sale purchases is that buyers generally are able to choose the unit they want. However this is dependent on how buoyant the property market is at that point in time. Nonetheless, under normal market conditions, buyers are able to select the units they desire.

Lastly, payment schemes for new and resale purchases are different. New sale buyers can opt for a progressive payment method, while resale buyers will have to start serving their mortgage based on the full loan amount after the sale is completed. While there are pros and cons for new and resale properties, I feel that resale properties will be a better bet for those who are looking for value-for-money deals.

6 comments:

la papillion said...

Hey AK,

Wah, collaboration with property guru? haha :)

AK71 said...

Hi LP,

I think this is a good book for anyone who wants some insights into the Singapore property market.

Of course, we have to take things with a pinch of salt, bearing in mind that some of the interviewees might have vested interests.

Mr. Propwise generously agreed to a very nice discount for readers of my blog. Best deal in Singapore, probably. Buy a copy? ;)

Anonymous said...

Hi AK,
You have highlighted some very good points.
New properties are rather small in built-in but have less estate problems; old / resale properties are more spacious but they also have more problems, as in the estate’s sewerage system, electrical wiring, toilet water seepage problems between floors, etc. Some of these problems simply cannot be solved on an individual basis because they belong to the common areas. Owners may need to fork out extra money if sinking fund cannot take care of these huge repair/replacement costs. But for resale properties, there is a possibility that you might also stand a chance of future en-bloc if you are lucky.

AK71 said...

Hi Anonymous,

Thanks for sharing you ideas. :)

I cannot take credit for the ideas in this blog post as they are found in the book "Secrets of Singapore Property Gurus". I just put up an excerpt. ;)

la papillion said...

Hi AK,

I've browsed through it before :)

I won't buy it though, cos I won't be getting a property anytime soon. I've just got mine, haha :)

Thanks for the recommendation though :)

AK71 said...

Hi LP,

Most welcome. I always like to share good stuff with people. ;)

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