Should I buy a new property from a developer or from the resale market?

Last updated on March 31st, 2018 at 11:43 pm

 

Many property analysts are expecting the real estate market to turnaround in the coming months. This might be a good time for you to start looking around to buy a new property.

In this post, we’ll explore the pros and cons of buying from a developer or the resale market. You may consider these factors before starting to property-hunt

Buying directly from a developer VS buying a unit from the resale market

If you’re thinking of buying an apartment or a house after visiting a nicely decorated showflat, that’s buying a property first-hand from a developer. Some developers are selling completed units. On the other hand, if you’ve been visiting houses for sale and meeting homeowners, you’re probably in the market for a resale unit.

The main difference is that it is a negotiable price in a resale property transaction while it is a fixed price if you buy from the developer.

What are the advantages of buying directly from a developer?

Just like how most consumers love buying new products from the mall, the same goes for property buyers. By buying from a developer, you’ll enjoy:

New furnishings and appliances. In many private condominium projects today, developers will include appliances and furniture like refrigerators and wardrobes in the sale.

Longer tenure. When a developer buys land to build houses, it usually comes with a 99-year or freehold tenure. Deducting 2-3 years spent on construction work, you will own the property for at least 90 years or more.

Modern lifestyle perks. In the face of increasing competition between developers, many new condominium projects have facilities like gourmet BBQ pits, heated jacuzzi pools, shuttle bus services and integrated smart home technology.

 

What are the disadvantages of buying directly from a developer?

There are also several disadvantages with buying a property first-hand from a developer.

Higher purchase price. Even with a slump in property prices, developers have been purchasing land at an aggressive pace. With a high cost price, you can expect to pay a premium on the completed property.

Longer wait time before occupying the premises. Developers usually start selling properties as soon as the project is approved. This can mean a wait time of up to 3-4 years till the temporary occupancy permit (TOP) is issued by the authorities. Look for completed projects if this disadvantage cannot be ignored in your property search.

Smaller apartment sizes. Singapore’s apartments are shrinking in size, as developers constantly work to maximise their profits after purchasing increasingly expensive land. In the past, a 2-bedroom apartment stretches across 100 square meters. Today, that same apartment takes up 70-80 square meters, including the balcony and ledges.

 

What are the advantages of buying a resale property?

 

While private properties accounts for around 20% of the overall residential market, a lot of transactions here are driven by them. By buying a resale unit, the purchaser enjoys several advantages over developer-sold transactions:

Cheaper for the same location. A old resale unit in the same street is possibly 20-30% cheaper than a brand new unit launched by the developer. In addition, sellers may sell due to a number of reasons and it is possible to score great deals. Some units are even sold on the resale market as distressed properties.

Move in immediately. Instead of waiting for a developer to complete the construction, you can move into a resale property soon after signing the sales & purchase agreement.

What you see is what you get. Show rooms are staged with clever interior design. It is common for new owners to feel their actual house looking smaller than what they saw at the showroom. Buying resale property lets you see the end product.

What are the disadvantages of buying a resale property?

 

There is a downside to resale property transactions too. To get the best deal, you’ll need to do some homework on the property before making an offer. You will also need to consider these inherent disadvantages to buying on the resale market.

Reduced land tenure. If you’re buying a 99-year leasehold property, your ownership duration of the land is reduced. You may also find it harder to sell in the future as the land depreciates in value further.

History of the property. There may be a reason for the owners to sell their property. Some might currently be in debt, and you’ll have occasional visits by unsavoury debt-collectors still looking to settle the loan.

Further investment on renovation. Depending on how well maintained the property is, you could spend a lot more money renovating a secondhand home before moving in.

Higher maintenance cost. A resale property is older and likely incurs higher maintenance cost. There may also be sinking fund costs that could be due to major repairs needed such as lift overhaul.

Final thoughts

There is no clear cut choice especially if you are looking for home stay. A new property from a developer while more expensive has its benefits.

However if you are investing, it may be better to look for undervalued properties from the resale market. Old units also carry an “en-bloc potential” which can bring you an investment windfall return.

Post was first published by krib.co