New Launch Vs Resale Condos – 5 Reasons Why New Launch Is Better
Remember my first article on New Launch Vs Resale Condos where I wrote about the 5 Reasons Why Resale Is Better?
There was this statistic that indicated a large fall in resale volume, but only a small drop in New Launch transactions.
What is it that makes new launch condos so attractive to buyers despite the seemingly high prices over resale properties?
In today’s topic, we swing the pendulum back to the New Launch Condos to look at 5 reasons why they are the better choice!
1. It’s Brand New, And You’re The First Owner
From personal experience I can say that this feeling is priceless, and in a lifetime of every property, only happens once.
While I haven’t got keys to my first property yet, mine was a brand new car and it was really exciting to make my first big purchase to be the first owner of something totally new.
Magnifying it for something as large as a property purchase, where the feel good factor is so much higher, I can definitely understand how this is a big thing to many people.
You know the feeling of buying second hand goods?
Sure, it’s for some people, but I think for many, if they can afford it and are willing to pay the premium, the preference would be to go for a brand new item.
Brand new house and modern facilities, thumbs up!
2. The Mortgage Payments Are Progressive
If you’ve never bought a home before, and are not used to paying for mortgages, a New Launch Condo allows you to ‘ease’ into it.
Because of the progressive payment scheme depending on the phase of building completion, mortgages can begin from as low as a few hundred dollars a month, and only gradually increasing to the full amount about a year after key collection!
This is because when the Temporary Occupation Permit (TOP) is obtained, that’s when key collection begins. Form then, it can take up to a year before the Certificate of Statutory Completion (CSC) is received by the development. Only then does your entire mortgage kick in.
Meaning, you can even live in a New Launch Condo when it completes before paying the full mortgage!
For buyers with a home to stay in the meantime and expects more financial stability in 3-4 years to deal with mortgage payments, the New Launch condo fits in well to their needs.
Especially for first time home buyers who may be ineligible for BTOs (which have a wait time anyway), the New Launch Condo is a viable alternative for consideration.
In contrast, the Resale Condo requires a high payment upfront, and the entire mortgage kicks in straight away upon completion of the sale.
3. The Defect Liability Period
Read in forums or heard from people about Resale Condo buyers only discovering certain property defects after the sale completion?
It is often not possible to do a 100% defect check on a resale condo before making the purchase.
And once the sale is confirmed, all the liability lies on the new owner.
So caveat emptor! Or buyer beware for resale purchases.
Remember that it is always in the seller’s interest to hide all negative aspects of the home from the prospective buyer.
However when buying a New Launch Condo, there is less to worry about as per the Building and Construction Authority (BCA) regulations, within a period of twelve (12) months from the date of Notice of Vacant Possession (TOP), also known as the Defects Liability Period (DLP), the developer is responsible for any defect that occurs in the unit, the housing project and the common property.
4. Lower Upfront Costs
These can come in a few forms, such as lower renovations costs, or not having to pay any cash over valuation.
A resale property may be old and require extensive renovation. This would eat into the cash savings of the buyer.
Whereas for the resale condos that are nicely renovated, the seller could then be asking for a high price.
This high price could be above the property valuation done by the bank.
Therefore, cash over valuation would apply.
For a new launch condo though, there never seems to be any problem for the property valuation to match the developer’s pricing.
The unit is also pretty much in move in condition which ensures minimal spend on renovations.
Commonly, even white goods are provided so all that is needed from the owner is furniture, lighting and curtains, and it’s all good to move in!
5. For Investors, The Initial Public Offering (IPO) Effect
Ever noticed how the stock price of an IPO company usually jumps up on the 1st day of trading?
The same effects are at play for New Launch Condos.
To give an analogy, It’s as if the early launch phases of a condominium project are like the seed funding rounds of a company.
That is where most trust is given to the developers that everything mentioned in the sales pitch like facilities, specifications, finishing and upside potential would come true upon TOP.
After all, as a buyer then, you really are just paying for air space.
Then, when it comes to the project’s completion, where the actual development, facilities and unit can be proudly showcased to potential new buyers, owners who have bought earlier and endured this ‘risk’, are able to be sell their units in the resale market.
Like an IPO, the demand for the project at this time would be the highest because it’s the first time access to the property is granted, and there would be a pool of buyers who prefer a new project, yet are not able to wait for the construction period.
As one of the owners of a completed New Launch Condo then, how much would you sell your property for?
The New Launch Condo investment strategy is but one of a few real estate investing strategies, which I would explore further in the near future.
Did I cover your reason in this article? Let me know if you agree in the comments below.
The jury is still out on New Launch vs Resale Condos.
Subscribe and join me as I go through more comparisons in this never ending debate.
See you in my next publication!