As Singaporeans, we all share common concerns when it comes to the property market. High prices, economic uncertainties, and the dilemma between new launches and resale properties weigh heavily on our minds. Fear not, though! With the right guidance and understanding, you can navigate this maze with confidence. Let’s dive into a practical case study to make this more relatable.
A Tale of Property Investment: Jo’s Journey
Meet Jo, a single lady with a keen eye for property investment. Recently, she was in the market for a $1.5 million property. As most of us would, Jo wondered whether to go for a new launch one-bedder or a two-bedder resale.
We often overlook some significant cost factors in this debate. Let’s dive into the financial comparison that helped Jo make her choice.
Resale Property: Hidden Costs
For a resale property with a buying price of $1.4 million and a loan size of $600,000 at a 4.5% interest rate, two significant costs can slip under the radar:
Renovation cost: This could be as high as $10,000 if you opt for a done-up unit.
Interest paid: Over a four-year span, you could pay around $101,000 in interest, given that your mortgage kicks in immediately upon legal completion.
So, over four years, you could be out of pocket by $111,000 – and that’s before accounting for maintenance fees!
Interest Payment Comparison
New Launch: Upfront Savings
On the other hand, a new launch property with a $1.5 million purchase price and the same loan size, but at a 4% interest rate, offers different financial dynamics:
Renovation cost: As the building is under construction, there are typically no additional renovation costs.
Interest paid: The loan only starts towards the end of the construction period, which means no interest lost during this waiting period.
So, in essence, buying a resale could incur additional costs of around $100,000 or more over a similar four-year span. If you plan to sell the resale property, ensure that it can fetch a price above your total expenditure.
Jo’s Decision
After understanding these implications and the effectiveness of a Loan Tenure Conversion Plan, Jo chose a new launch. She didn’t mind waiting for the construction period and found the financial breakdowns favourable.
Resale Condo vs New Launch: Mortgage Implications
In the case of a resale property, the full-fledged monthly mortgage payout kicks in immediately. If you need the property for immediate occupancy or rental income, this might work for you.
A new launch, however, offers progressive mortgage disbursement. This gradual easing into the mortgage payment can seem more manageable to many. Plus, you might accumulate CPF contributions since it will less likely be exhausted from the first year’s mortgage.
Progressive Payment Vs Resale Mortgage Breakdown
Food for Thought
Resale Property Buyers: If you bought a resale property, be aware that its value may not appreciate as fast as the previous owner’s, who could have gained 20-30% from reselling to you. Remember your original intention for buying a resale – whether it was rental income or personal use – and manage your expectations.
New Launch Buyers: If your primary aim is capital gains, a new launch is your best bet, given the general trend of positive growth over a five-year holding period. Most of these profitable transactions are due to Government Land Sales (GLS), which typically boost new launch prices.
Profits Of The Panorama & High Park Residence Sold In 2023
The Property Market: Interest Rates, Prices, and Resilience
Singapore’s property market has grown resilient over the years. Despite the Singapore Overnight Rate Average (SORA) going down in 2007, property sentiments were still on the rise. From 2009 to 2013, property prices soared by 62.2%, even with historically low interest rates.
From 2015 to 2018, several rounds of interest rate hikes stabilized the market. As of 2020, despite all-time low interest rates, the property market trended upwards.
The rapid growth in property prices has led to increased interest rates to ensure price stability and protect our property values. This along with the cooling measures ensures a regulated and less speculated property market.
The Final Verdict
Our property market will continue to rise, regardless of high or low interest rates. The key is to exercise prudence when buying property and align your goals with building capital instead of making profits.
Whether you buy a resale property or a new launch, understanding the market and your financial implications is vital. Remember, the capital you build while living in your property will contribute to your net worth when you turn 65.
Resale or New Launch? Or is it even a good time to consider a private property now?
Feel free to reach out for detailed breakdowns and advice that could potentially save you a lot of money and meet your property financing expectations.
How can we assist you?
By offering you Heart-Centered, Strategic, and Safe Asset Progression Property Advice tailored to your needs.
By devising a clear, objective, and safe roadmap for your property journey that truly aligns with your goals.
Don’t let the uncertainty and lack of clarity overwhelm you. Let’s navigate this together. Get in touch with us today and take the first step towards building your family’s future!
